Fixed vs. Variable Rate.

A fixed interest rate stays the same for the life of the loan or deposit — payments are predictable regardless of what the Federal Reserve does. A variable rate floats with a benchmark such as the prime rate or SOFR, so monthly payments rise and fall with market conditions. Fixed rates suit borrowers who value payment certainty or expect rates to rise; variable rates can be cheaper when rates are high and falling, or for short-term borrowing where rate-reset exposure is limited. Credit cards almost universally carry variable rates that adjust quickly when the Fed moves.