Variable CD rates – A risk worth taking or not?
There are plenty of aspects of this world that are beyond the control of the average individual. Even though people like to think that they are firmly in control of their lives which is quite often the case, there are however times when unforeseen circumstances interject themselves in to the proceedings and cause all sorts of commotions. Take for instance someone who is working a nine to five job and has a fixed income that person’s life is pretty predictable and can be quite comfortable or monotonous depending on that person’s perspective.
However should that person be lucky enough to strike it big in the lottery or be unlucky enough to be targeted by a mugger then that person’s life will change dramatically due to an unforeseen occurrence, a variable event if you will. Variability also comes in to play when it comes to finances and more specifically those that are handled between an individual and a bank. In this particular case variability can mean the difference between a nice tidy gain in finances or maybe a really good gain and maybe even a not so desirable gain at all. Variability can really be a factor to people and unfortunately it is one that cannot be predicted.
Variability comes in to play in a lot of ways when it comes to money and one particular way that it can really factor in to people’s financial well being is through the CD or otherwise known as the certificate of deposit. The certificate of deposit is essentially just money that is placed in to a bank with the main difference being that there are terms and conditions surrounding when it can be withdrawn and how much interest it can obtain over the course of its stay in the bank.
There are certainly pros and cons to this type of account and the situation of the person with the money is usually what dictates that. Opting for the certificate of deposit is certainly a good option for people but going this route will mean that the money to be deposited cannot be drawn for a specified period of time. This could certainly work for those people that are looking to let their money grow and do not have an immediate need for it. A certificate of deposit can also be advantageous to people because the interest rates that accompany it are usually better than the ones that are used for other similar accounts. This is not however always the case and that is where the variable rates of the CD come in.
Taking on the variable rate for the CD is basically equivalent to making a calculated gamble. Should the interest rate rise over the course of the CD then it will spell additional money for the person but should the interest rates drop then that will mean less money. A variable rate is certainly an option well worth exploring but making sure that it will be more profitable could end up being an exercise in futility. Weigh the options well and decide whether the chance for money is actually a probability to materialize and if not then maybe go another route when it comes to the rate.