(Update 9/7/25: It’s now minus 3% instead of minus 2.75%)
There’s an interesting ‘flex index CD’ offering from Merchants Bank of Indiana which has a floating rate which goes up and down based on the rates set by the feds.
Flex Index CD from Merchants Bank of Indiana | see the current Prime Rate index rates here
You lock in the money with a 12 or 24 or 36 month CD, and get an interest rate equal to the Prime Rate index minus a margin of 2.75%. There’s also a floor of 0% ensuring that you never actually lose money.
Currently the bank shows a CD earn rate of 2.79% APY. That’s based on a 5.50% fed rate. They discount 2.75% off 5.50% resulting in 2.75%, which turns into 2.79% when compounded.
The best 12-month CD rate at the time of this writing is 3.00% from Comenity Bread Bank. The 2.79% rate from Merchants Bank of Indiana is lower right now.
Now, suppose in 6 months the feds raise interest rates by another 1%. You’ll end up getting 3.82% APY on the second half of the year and 2.79% on the first half. That gives you a higher annualized return than the 3% Comenity offering. Note again: rates can go up or down based on the feds interest rate.
I don’t recall seeing a similar offering and found this intriguing. In the end, you’ll have to run the numbers for yourself based on how you predict the next 12/24/36 months playing out and decide if this CD is a good option for you. It could be a good option for someone who prefers just riding the market rate and not having to constantly adjust to find the best one.
Hat tip to BobbyJ
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