Savings Accounts: Fixed Rate vs. Variable Rate

Interest rate is perhaps the most important factor to consider when choosing a savings bank. You need to make sure that the money you are saving is earning enough interest to make the savings account beneficial. There are two main types of interest rates now used by banks and financial institutions: fixed rate and variable rate. As the name suggests, fixed rate means the interest rate is set at a fixed level. However, the fixed interest rate may only apply during a predetermined period, after which the interest rate receives adjustments and returns to the market level. If you plan on opening a savings account with a fixed interest rate, make sure you check if withdrawals are allowed during the fixed-rate period; some banks don’t allow you to make withdrawals during the period or they simply charge you a penalty for every withdrawal you make. Variable rate, on the other hand, is set based on the market interest rate.

Although the interest rate can go down depending on the market condition, it can also go up if the market is developing superbly. Variable rate savings account also come with broader boundaries and customer-friendly terms and conditions, allowing instant withdrawals at any time and offering tons of added benefits. This type of savings account interest rate is perfect if you are starting a self-insurance account or if you set the savings account for emergency purposes. Which one of these two interest rate types is best? The answer depends highly on your needs and preferences. Simply analyze your personal financial needs and you will be able to determine the best savings account to open based on advantages each type is offering. Don’t forget to compare offers from different banks in order to spot the most beneficial savings account to open in no time at all.