Bump Up CDs Guide
This Bump Up CDs guide is to help the investor understand the advantages and disadvantages of this particular type of investment.
The term bump up is in reference to what can be done with the interest rate of a CD before it matures. The standard CD is a fixed term investment which has a set to and agreed upon interest rate the investor is willing to loan the financial institution for the pre-described time span.
With a bump up CD, the interest rate that was agreed to when the deposit was made can be increased to a new level. The amount of the increase is generally limited to the set amount the financial institution is offering new clients for their CD’s at the same term your investment is.
This amount on average is only 0.25% and can only occur one time during the term of the CD. The actual amount of the increase is generally regulated by the movement by the Federal Reserve on the Prime rate. Usually this movement is only a quarter point.
If you have decided this is the path for you look at the fine print of the certificate. In some instances when you chose to bump up the rate as allowed, there is a catch of the term being extended. This is not always to the advantage of the investor.
Before investing in a bump up CD first look online. Banking and interest environments should favor the investor before this type of CD in purchased.
At the present time this type of investment is not in favor of the investor since the FED is not showing any signs of increasing the interest rates any time soon. Since the initial interest rate of the bump up CD is significantly lower than the fixed rate CD’s, the investor would not make as much of a profit as they would with a fixed rate CD.
I hope this Bump Up CDs guide helps clear up any confusion the banks have spread on this issue.
For additional resources involving financial help, please view OneWest Mortgage Rates on this website. On our sister site, there is Wells Fargo CD Rates Review.
We strive to bring you the latest and most accurate data possible from the home sites of the financial institutions we name. Always remember, the bigger the risk, the larger the reward or loss. Invest with caution.
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