A CD, or certificate of deposit, is a popular savings vehicle because your interest rate is guaranteed. So if rates drop, you can still count on a guaranteed return.
But that also means if APYs increase, you'll miss out on that improved yield.
A bump-up CD allows you to request a rate increase before your maturity date. It's not automatic, and most banks have restrictions on how many times you can request a rate bump. .
Find out how bump-up CDs work and which banks offer them.
What is a bump-up CD?
A traditional CD comes with a fixed APY that stays constant for the length of the term. A bump-up CD lets you request an interest rate increase if the bank has raised its rates.
That's especially useful if the Federal Reserve is raising the Fed funds rate. When the Fed raises its benchmark rate, banks face higher borrowing costs and often boost APYs on CDs and savings accounts to increase their cash reserves.
How does a bump-up CD work?
Bump-up CDs are specialty products only offered by some banks. You'll open your account with a fixed term, usually two or three years, and an initial APY, much like a traditional CD. Bump-up CDs often start with APYs that are 0.10 to 0.25% lower than standard CDs, however.
- You open the bump-up CD at the current APY
- Interest rates rise during your CD term
- You request a rate increase
- The increase is not retroactive
Offers in this section are from affiliate partners and selected based on a combination of engagement, product relevance, compensation, and consistent availability.
From 3.80% to 4.50% APY
From 6 months to 5 years
Bread Savings™ (formerly Comenity Direct) is a product of Comenity Capital Bank, a Member FDIC.
From 3.90% to 4.35% APY
From 6 months to 6 years
Marcus by Goldman Sachs® is a brand of Goldman Sachs Bank USA, a Member FDIC.
The APY increase is not automatic — you must carefully monitor rates and actively ask for the adjustment. Most institutions limit savers to one or two bumps per CD, so there is a risk that rates continue to rise after you make your move.
As with most CDs, there is often a minimum (and sometimes maximum) deposit. And withdrawing funds before your maturity date will result in a penalty that can cost you much o all of the interest you've accrued.
Where to open a bump-up CD
You can open a bump-up CD at a traditional bank, credit union or online bank. However there are a limited number of institutions that offer them.
- Synchrony Bank allows savers to bump up their rate once on its two-year CD with no deposit minimum.
- Ally Bank allows savers to increase their rate once on a two-year CD and twice on a four-year CD. It has no deposit minimum either.
- Marcus by Goldman Sachs has a 20-Month bump CD with a $500 minimum opening deposit.
Ally Bank® CDs
Annual Percentage Yield (APY)
2.70% to 4.00% APY
Terms
3 months to 5 years
Minimum deposit
None
Early withdrawal penalty fee
For terms of 3 months or less, the early withdrawal penalty is 30 days of interest; for terms of 3 to 24 months, it's 60 days of interest; for terms of 25 to 36 months it's 90 days of interest; for terms of 37 to 48 months, it's 120 days of interest and for terms of 49 months or longer the penalty is 150 days of interest. With a no-penalty CD, you can withdraw all funds any time after the first 6 days from funding. Partial withdrawals are prohibited.
Terms apply.
Read our Ally Bank High Yield CD review.
Pros
- Above-average APYs
- No minimum deposit
- Offers no-penalty, IRA and Raise Your Rate bump-up CDs
- A 0.05% loyalty reward is automatically added when you renew your CD
Cons
- Ally does not offer an add-on CD
- No physical branches
Synchrony Bank CDs
Annual Percentage Yield (APY)
0.25% to 4.35% APY
Terms
3 months to 5 years
Minimum deposit
None
Early withdrawal penalty
An early withdrawal penalty may be applied if you withdraw funds from the principal prior to the maturity date. For no-penalty CDs, withdrawals are not allowed within the first 6 days after account funding. After that, only the withdrawal of the entire balance is allowed.
Terms apply.
Pros
- Above-average APYs
- Nine term options, from 3 months to 5 years
- No minimum deposit
- Offers no-penalty, bump-up and IRA CDs
- If the rate increases within 10 days of account opening, you're automatically bumped up to the higher rate
Cons
- No physical branches
- No-penalty CD doesn't allow partial withdrawal
APYs are subject to change at any time without notice. Offers apply to personal accounts only. Fees may reduce earnings. For CD accounts, a penalty may be imposed for early withdrawals. After maturity, if your CD rolls over, you will earn the offered rate of interest for your CD type in effect at that time.
Marcus by Goldman Sachs® CDs
Annual Percentage Yield (APY)
From 3.90% to 4.35% APY
Terms
From 6 months to 6 years
Minimum deposit
$500
Early withdrawal penalty
For CD terms under 1 year, the penalty is 90 days of simple interest. For terms between 1 year and 5 years, the penalty is 180 days of interest. For terms of more than 5 years, the penalty is 270 days of interest. No-penalty CDs are not subject to a penalty after seven days.
Terms apply.
Pros
- Above-average APYs
- Low $500 minimum opening deposit
- 10-Day CD rate guarantee
- Offers no-penalty and bump-up CDs
Cons
- No-penalty CD doesn't allow a partial withdrawal
- No physical branch locations
When deciding where to open a bump-up CD, compare the initial APY, maturity term, the number and frequency of increases allowed, any minimum deposit requirements and penalties fo early withdrawals.
Bump-up CDs vs. step-up CDs
A bump-up CD shouldn't be confused with a step-up CD, which also allows rate changes. Unlike bump-up CDs, step-up CDs come with automatic increases that the bank schedules in advance.
U.S. Bank offers a 28-month step-up CD with automatic rate increases every seven months.
U.S. Bank CDs
Annual Percentage Yield (APY)
APYs vary by term and location.
Terms
1 month to 5 years
Minimum deposit
$500 or $1,000
Early withdrawal penalty
The early withdrawal penalty is usually based on the account balance.
Terms apply.
Pros
- Competitive APYs on CD specials
- Offers bump-up and step-up CDs
- 2,000 branches across more than 28 states
Cons
- Standard CDs have low APYs
- Doesn't offer no-penalty CDs
Because the rate on a step-up CD changes, banks calculate a "blended APY" that's a weighted average of the starting rate and each scheduled increase. Make sure the blended APY is higher than the advertised rate for a traditional CD.
Other types of CDs
Bump-up CDs are only one kind of specialty account
High-yield CDs: High-yield CDs are just like traditional CDs, but with above-average interest rates. Usually offered by online banks, high-yield CDs offer APYs more than double the national average.
Jumbo CDs: The minimum for a jumbo CD is usually $50,000 to $100,000. In exchange, you may receive a higher APY, but that's not always the case.
Add-on CDs: Add-on CDs allow you to make additional deposits throughout the term. Most banks restrict how many additional deposits you can make, based on the term.
No-penalty CDs: A no-penalty CD allows you to withdraw money before your CD reaches maturity without the usual penalty. Most banks require funds to remain untouched for at least seven days before you can withdraw penalty-free and require you to take out the entire balance.
Brokered CDs: Brokered CDs are sold through brokerage firms and offer higher rates and longer terms. You can sell them on the secondary market before maturity, which makes them more liquid. It also means you could lose money if you have to sell for less than your original investment.
IRA CDs: These are retirement savings accounts that hold one or more certificates of deposit, combining the safety of a CD with the tax advantages of an IRA. Because of its low risk, an IRA CD is preferred by savers near or in retirement.
Bump-up CD pros and cons
While a bump-up CD is advantageous in a rising-rate environment, there are drawbacks to consider.
Pros
- You can switch to a higher yield if the bank raises rates on the same CD
- Your APY will never drop below your initial locked-in rate.
Cons
- Most banks and credit unions don't offer bump-up CDs
- Most institutions restrict you to just one or two rate increases
- Bump-up CDs tend to have lower APYs to begin with.
- You'll need to closely monitor APYs to know when to take advantage of a rate increase.
FAQs
What is a bump-up CD?
A bump-up CD is a certificate of deposit that lets you request a higher interest rate before the maturity date if your bank raises the rate available for the same CD term.
Is a bump-up CD a good idea?
Bump-up CDs can be a good idea if you expect interest rates to rise. The trade-off is that you may get a lower APY and will have to monitor rates to know when to request an increase.
What's the difference between a bump-up and step-up CD?
The rate on a step-up CD automatically increases at predetermined intervals, while a bump-up CD requires the saver to actively request the increase when they think is the most advantageous time.
Read more
Information about the Synchrony Bank High Yield Savings Account has been collected independently by CNBC and has not been reviewed or provided by the bank prior to publication.
