what determines the rate on a variable rate cd 
the financial institution decides which benchmark rate it will use to set the cd s rate the frequency of change and any other factors for example institutions could use the federal reserve bank s federal funds target rate the bank s prime rate the federal funds rate upper limit or the wall street journal prime rate wsjp the interest rate is expressed as an annual percentage yield could even change daily at the institution s discretion the bottom linevariable rate cds provide a variety of benefits to people looking for a secure protected investment that will earn a relatively modest amount of interest if rates are rising remember that the earned interest is usually inaccessible to the account holder until the cd matures as attractive as they sound variable rate cds also come with certain pitfalls for example prolonged low interest rates can adversely affect your returns even if the rates increase later your rate and returns could also fall if benchmark rates decline in contrast fixed rate cds are more profitable during such times 