A bump up certificate of deposit (CD) is a traditional CD with a twist. With a traditional CD, you are paid a set interest rate for the life of the CD – nothing more, nothing less. CDs are appealing because they’re predictable. They’re FDIC insured and you know that your principal is protected 100%.
With a bump up CD, you get the added bonus of knowing that if interest rates rise, you can get your rate increased. The rules vary from bank to bank but the basic idea is the same, you can “bump up” the rate on the CD if it exceeds the CD’s current rate. The bump up CD won’t usually have the best CD rates but they do tease you with the ability to increase that rate should yields improve.
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