Add news
March 2010 April 2010 May 2010 June 2010 July 2010
August 2010
September 2010 October 2010
November 2010
December 2010
January 2011
February 2011 March 2011 April 2011 May 2011 June 2011 July 2011 August 2011 September 2011 October 2011 November 2011 December 2011 January 2012 February 2012 March 2012 April 2012 May 2012 June 2012 July 2012 August 2012 September 2012 October 2012 November 2012 December 2012 January 2013 February 2013 March 2013 April 2013 May 2013 June 2013 July 2013 August 2013 September 2013 October 2013 November 2013 December 2013 January 2014 February 2014 March 2014 April 2014 May 2014 June 2014 July 2014 August 2014 September 2014 October 2014 November 2014 December 2014 January 2015 February 2015 March 2015 April 2015 May 2015 June 2015 July 2015 August 2015 September 2015 October 2015 November 2015 December 2015 January 2016 February 2016 March 2016 April 2016 May 2016 June 2016 July 2016 August 2016 September 2016 October 2016 November 2016 December 2016 January 2017 February 2017 March 2017 April 2017 May 2017 June 2017 July 2017 August 2017 September 2017 October 2017 November 2017 December 2017 January 2018 February 2018 March 2018 April 2018 May 2018 June 2018 July 2018 August 2018 September 2018 October 2018 November 2018 December 2018 January 2019 February 2019 March 2019 April 2019 May 2019 June 2019 July 2019 August 2019 September 2019 October 2019 November 2019 December 2019 January 2020 February 2020 March 2020 April 2020 May 2020 June 2020 July 2020 August 2020 September 2020 October 2020 November 2020 December 2020 January 2021 February 2021 March 2021 April 2021 May 2021 June 2021 July 2021 August 2021 September 2021 October 2021 November 2021 December 2021 January 2022 February 2022 March 2022 April 2022 May 2022 June 2022 July 2022 August 2022 September 2022 October 2022 November 2022 December 2022 January 2023 February 2023 March 2023 April 2023 May 2023 June 2023 July 2023 August 2023 September 2023 October 2023 November 2023 December 2023 January 2024 February 2024 March 2024 April 2024 May 2024 June 2024 July 2024
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
News Every Day |

Fixed vs. variable interest rates: Which is best for how you borrow and save money?


When you apply for a bank account or financing, the interest rate you receive can give you a sense of how much you’ll earn in returns — or pay to borrow money. However, not all interest rates work the same. Two of the main types of interest rates you’ll come across are fixed rates and variable rates. The main difference is that fixed rates stay the same over time while variable rates can change based on market conditions.

In many cases, the choice between fixed and variable rates will be a choice between products, rather than providers. For example, it’s difficult to find a personal loan with a variable rate or high-yield savings account with a fixed rate. But with some products like home or car loans, you can choose the type of rate that works best for you. And which works best for you largely depends on the state of the economy and how long you plan on using that product.

With a fixed-rate product, such as a loan or bank account, the interest rate you sign up for is the interest rate you’ll earn for the life of the product. For example, most certificates of deposit earn the same rate of return every month until they reach maturity — even if the Federal Reserve raises or lowers interest rates.

The main benefit of using a fixed-rate product is predictability: You’ll know ahead of time exactly how much you’ll earn on a traditional CD. The same is true for loans — you’ll know the monthly and total cost of a fixed-rate loan before you sign the closing documents.

Generally, fixed rates offer higher savings on interest-earning products when the federal funds rate — or Fed rate — is high. This is particularly true when the Federal Reserve is signaling that they might lower interest rates in the future. By opening a fixed-rate account in a high-rate environment, you’re able to lock in earnings you could otherwise lose if you signed up for a variable-rate account.

The opposite is true for products that require you to pay interest, like loans and credit cards. Fixed rates are beneficial when you need to borrow money and the Fed rate is low. This is particularly true when it comes to long-term financing, since a fixed rate also offers protection against a fluctuating market. After all, it’s difficult to predict how the market will change over the next 10 or 20 years.

Financial products that typically come with fixed interest rates include:

Dig deeper: High-yield savings vs. CDs: What to know while rates are high

Some savings bonds have fixed interest rates, though they’re subject to change after long periods of time. For example, Series EE Savings Bonds currently earn a 2.70% interest rate, which is subject to change after 20 years. Series I Savings Bonds are fixed at 4.28%, though this rate may change every six months based on the inflation rate.

Treasury notes and Treasury bills also technically come with fixed rates, though how much you earn depends on the price of the security when you sell it. However, the Treasury Department sometimes guarantees that you’ll earn money. For example, you’ll earn no less than 0.125% in interest on a Treasury note.

Variable rates work by rising or falling in reaction to financial markets. Typically, they’re tied to a benchmark rate, such as the Wall Street Journal Prime Rate and the Secured Overnight Financing Rate. Benchmark rates are based on the lowest interest rate banks are willing to offer to a borrower, and they’re highly influenced by the Fed rate. This is especially true for the WSJ Prime rate, which typically changes a few days after a Federal Reserve meeting at which the Fed announces a rate adjustment.

With financing, variable rates typically comprise a low, fixed interest rate — called a margin rate — and a benchmark rate. So if you take out a loan with a 4% margin rate plus the prime rate, you’re essentially guaranteeing that you’ll pay at least 4% in interest. But in reality, you’ll likely pay at least 7.25% in interest, since the prime rate hasn’t dipped below 3.25% in the past 50 years.

The annual percentange yield (APY) on bank accounts is a little less predictable than the annual percentage rate (APR) on a bank's lending products, but the two measurements tend to rise and fall in tandem. That’s because banks use APYs to draw in customers to deposit funds, which the banks use to fund loans and earn interest. If banks are earning more interest from consumers, they can afford to entice more people to open bank accounts with higher APYs.

In many cases, lenders set caps on variable-rate products. This was designed to protect consumer borrowers from the kind of runaway interest the country saw during the 1980s.

There are no federal interest rate protections for all consumers, though the Military Lending Act prevents lenders from charging more than 36% in interest and fees to active duty service members and their spouses. Many states also cap interest rates at 36% or lower for consumer loans.

Lenders can also offer caps on variable rates in addition to government protections. This is common particularly with private student loans and home loan products. In fact, adjustable-rate mortgages come with several rate caps to protect consumers during periodic rate adjustments in addition to the life of the loan.

???? Why do interest rates change?

Interest rate changes are among the only means that the federal government has to control the U.S. economy. Typically, the Federal Reserve raises interest rates to help lower prices during a time of inflation, and lowers rates during an economic downturn or recession.

The logic here ties back to supply and demand: Higher interest rates make borrowing more expensive, which in turn keeps some people from making expensive purchases that require financing — like a home or a car. The decreased demand for these products should, in theory, lower the prices and cool inflation.

When the Federal Reserve lowers interest rates, the intention is to make it easier for folks to make large purchases. This helps funnel money into businesses, stimulating economic growth.

Unfortunately for borrowers, a study published by the Federal Reserve found that it takes a lot longer to cool the economy than it does to heat it up. That’s because other factors, such as a nationwide housing shortage, can work against the high Fed rate by keeping prices high.

Variable rates are often a better option for interest-earning products when the Fed rate is low. That’s because you’ll have a chance of earning more interest in the future if interest rates rise.

The opposite is true for financing products that require you to pay interest. Variable-rate financing products are more beneficial when rates are high and appear to be coming down. If it’s expected that rates could potentially increase even more, fixed-rate products may be a safer choice.

Here’s a list of the types of products that can come with variable interest rates:

Dig deeper: High-yield savings vs. money market account: Which is best for growing your savings?

Some investment products earn interest that works similarly to a variable rate. For example, floating-rate notes, or FRNs, have rates based on the 13-week Treasury bill, plus a spread — similar to a margin rate.

Treasury Inflation Protected Securities, or TIPS, also pay out interest that functionally works like a variable rate. Technically, the interest rate on a TIPS is fixed at no less than 0.125%, but the principal can increase or decrease depending on the market. So while the interest rate remains the same, the interest payout you receive can change depending on the principal.

Often you won’t have a choice between fixed and variable rates — even if the product you need would benefit from one more than the other. In that case, you might want to consider swapping products when the market changes. With interest-earning products, this typically involves moving money among bank deposit or savings accounts. With lending, this typically involves refinancing.

Consider this example of how to keep yields high on a savings account. Say you transfer your savings to a high-yield savings account with a variable rate after the Federal Reserve announced it’s raising the Fed rate to cool inflation. The trickle of returns you were accustomed to when rates were low suddenly turn into a flood.

But recently, the Federal Reserve begins signaling it wants to lower rates soon. To keep those high returns coming, you might decide to put some of that money into a fixed-rate certificate of deposit.

Here’s an example of how to keep rates low on financing. Say you take out a fixed-rate personal loan to pay down high-interest credit card debt when the Fed rate is at an all-time high. Since credit card rates are generally higher than personal loan rates by default, the slight interest savings are worth it.

But then, a year into paying off your loan, the Federal Reserve lowers rates. Suddenly, you’re left with a 16% APR when you could qualify for a 9% APR if you took out a loan today. You can still take advantage of the lower-rate environment by taking out a new personal loan at that 9% APR to pay off the 16% APR loan.

Fixed and variable rates aren’t the only type of interest rates to keep in mind when you’re shopping around for a financial product.

Here are some other types of interest you might run into:

  • Tiered interest. Tiered interest offers different series of APY ranges depending on how much you deposit into a bank account — typically the more you deposit, the higher the rate of return. This is most common on CDs and money market accounts.

  • Compound interest. Compounding is often described as earning interest on your interest. It’s a way of earning interest on both your initial account principal and any interest you’ve earned along the way. You’ll find compound interest on most types of deposit and savings accounts.

  • Simple interest. Simple interest is the inverse of compound interest in that it separates your principal from any interest. It uses only your principal — with no compounding. This type of interest is common on financing products like loans.

Anna Serio-Ali is a trusted lending expert who specializes in consumer and business financing. A former certified commercial loan officer, Anna's written and edited more than a thousand articles to help Americans strengthen their financial literacy. Her expertise and analysis on personal, student, business and car loans has been featured in Business Insider, CNBC, Nasdaq and ValueWalk, among other publications, and she earned an Expert Contributor in Finance badge from review site Best Company in 2020 for her work at Finder.


Столичные сотрудники Росгвардии задержали мужчину по подозрению в нанесении ножевого ранения в Москве

Faculty of International Journalism and Mass Communications Eurasian International University is conducting an additional intake of applicants!

England U20 overpower France to be crowned world champions

Suspect arrested for ‘threatening to kill Trump and his VP pick JD Vance’ in Florida days after assassination attempt

Actors Who Died With Unfinished Roles

Read also

‘Discussions to be held’ as Emily Upjohn misses King George with blockbuster field of 11 confirmed for £1.25m Ascot race

Meet the American who popularized Chinese food in the US: immigrant chef Joyce Chen

Ryan McMahon Player Props: July 22, Rockies vs. Red Sox

News, articles, comments, with a minute-by-minute update, now on

News Every Day

Exclusive - Sayantani Ghosh expresses happiness as sets of her show Dahej Daasi shifted close to her home; says 'I've been manifesting this for quite some time now' — latest news 24/7. You can add your news instantly now — here

News Every Day

Actors Who Died With Unfinished Roles

Sports today

Новости тенниса

Рейтинг ATP. Рууд обошел Рублева, Берреттини вернулся в топ-50, Надаль поднялся на 100 строчек

Спорт в России и мире

Экс-игрок Мостовой: в матче с "Акроном" я увидел обычный "Локомотив"

All sports news today

Sports in Russia today


До конца июля анимационная компания «ЯРКО» проведет еще одно мероприятие в ТРЦ «Ривьера» – развлекательную программу по мотивам мультсериала «Команда МАТЧ» (‍27 июля).

Новости России

Game News

Интервью AppTime с компанией Innova: релиз Gran Saga в России, внутриигровая оплата и «Масленица» в корейской MMO

Губернаторы России
Сергей Собянин

Собянин объявил о начале строительства станции метро "Рублево-Архангельское"

Владислав Овчинский: жители дома на Радужной улице начали переезд в новостройку по программе реновации

Певец Дмитрий Камский готовит к релизу новый сингл "Песня Земли"

«Духовная столица БРИКС»: как пройдет Премия Священного Корана в Казани

Житель Зеленограда угнал автомобиль и отправился в ночной клуб

Подопечная Басты: стало известно, с кем встречается Элджей после брака с Ивлеевой

Нарколог Шуров прокомментировал поведение Глюкозы на концерте в Красноярске

Певец Александр Буйнов показал своего внука, окончившего кадетское училище

Юрий Лоза о «Спартаке»: «Каждый год болельщики верят в чемпионство, но его нет. Идеальный тренер – бывший спартаковец. Станкович будет ставить югославский футбол»

Рафаэль Надаль вышел в финал турнира в Бостаде

Рафаэль Надаль проиграл в первом финале тура ATP в преддверии своей последней Олимпиады

Уроженка Самарской области выступит на Олимпиаде в Париже

Рафаэль Надаль сыграет в финале турнира ATP впервые с 2022 года

Филиал № 4 ОСФР по Москве и Московской области информирует: С начала 2024 года 140 тысяч женщин и новорожденных Московского региона получили услуги по родовым сертификатам

Несколько авиарейсов в Томск задерживаются из-за тумана

Бизнесмен вакцинировался от суда // Дело об особо крупной растрате рассмотрят в заочном режиме

Отрытый конкурс красоты и таланта «Одна на миллион»

Путин заверил Асада в поддержке РФ властей Сирии в отстаивании суверенитета

Today's Wordle answer for Saturday, July 20

Shaman назвал выступление у посольства США ответом РФ на блокировку на YouTube

«Спартак» проиграл в первом матче РПЛ под руководством тренера Станковича

Фестиваль «Достоевский» впервые провели в Зарайске

Экс-министр обороны ДНР Стрелков устроился в колонии работать в швейный цех

Компания из Самары установит камеры слежки за водителями на Славы и Пулковском шоссе

Захарова посоветовала Макрону искупаться в Сене

Путин в России и мире

Персональные новости
Елена Волкова

Трек Насти Балакиной "Автопилот" набирает высоту в чартах

News Every Day

Exclusive - Sayantani Ghosh expresses happiness as sets of her show Dahej Daasi shifted close to her home; says 'I've been manifesting this for quite some time now'

Friends of Today24

Музыкальные новости

Персональные новости