Bump-Up CDs: What Are They, and Should You Open One?

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• If you open a bump-up CD, you can request a rate change before the term ends.
• Bump-up CDs may have limitations on how many rate changes you can request or when they can occur.
• A bump-up CD might be a good choice if interest rates are expected to go up, but not if rates are dropping or stagnant.

If you're interested in an interest-earning bank account, there are numerous types of CDs you can explore. For example, bump-up CDs offer more flexibility than traditional CDs if rates are going up. (Rates have been increasing this year, and currently, some of the best CD rates are well over 5% APY.)

Here's what you need to know about bump-up CDs to see if one might be right for you.

What is a bump-up CD?

A bump-up CD is a type of certificate of deposit with a variable interest rate, whereas traditional CDs have a fixed interest rate, meaning the initial rate is locked in for the entire term.

A bump-up CD allows you to request a rate change before the term ends. "The consumer has the ability to go back in and watch rates, and as rates increase, take an increase that then applies to the entire remainder of the term," explains Dan Robinson, a senior vice president at Synchrony. "They don't need to go back through an account opening process or select a new product."

Generally, you'll have to contact customer service when you want to request a rate increase. Rules on requesting a rate change vary among banks. For example, at some financial institutions, you might not be able to request a rate change during the first few months of account opening. Others may apply a shorter time frame of up to 10 days.

There also may be limits on how many times you can request a rate change. Typically, banks and credit unions permit at least one or two rate increases during a term.

Bump-up CD features

Here are some of the most common characteristics to note for bump-up CDs:

• Minimum opening deposits: The minimum needed to open an account can vary depending on the financial institution. For traditional bump-up CDs, it can range from $0 to $25,000. Jumbo bump-up CDs may range from $50,000 to $100,000.
• Liquidity: Similar to a traditional CD, you must pay an early withdrawal penalty if you take out money from an account before the term ends. You also can't make additional account deposits after account opening like you would be able to with a savings account or money market account.
• Availability: Bump-up CDs aren't available at some financial institutions. Those that do have them may only offer a few terms.
• Interest rate: If newly-issued CD rates go up, you may request a rate increase from your bank or credit union. Keep in mind that bump-up CD rates start off lower than traditional CDs because of your ability to get a higher rate later.
• FDIC insurance: A bump-up CD at an FDIC or NCUA-insured financial institution is safe. Up to $250,000 is secure in an individual account, and $500,000 is protected in joint accounts.

Bump-up CDs vs. step-up CDs

Step-up CDs are similar to bump-up CDs because the interest rate can change. However, the way step-up CDs apply rate increases may be different.

Step-up CDs usually have a specific date when the rate will increase. Some financial institutions may even include rate information online. In comparison, bump-up CDs do not have a specified date for rate changes. Instead, you can request it during the term.

Bump-up CD vs. high-yield savings account

A bump-up CD may have a lower initial interest rate than a high-yield savings account , but it has a potential upside. When interest rates on newly-issued CDs increase, you can ask your bank to change your CD rate to match. From that point until the date your CD matures, you are locked in to the higher rate — even if rates go back down.

With a high-yield savings account, rates can fluctuate at any time. However, you can access your money more easily from a savings account, since there are no early withdrawal penalties.

Where to find the best bump-up CD rates

The following national banks and credit unions offer bump-up CDs. You can also read our bank reviews to learn more about each financial institution.

• Ally Bank : Ally Bank has 2-year and 4-year bump-up CDs referred to as Raise Your Rate CDs. The 2-year bump-up CD permits a one-time increase, while the 4-year term allows two rate increases.
• Marcus : Marcus offers a 20-month Rate Bump CD. You can request a one-time rate increase.
• Synchrony Bank : Synchrony has a 2-year bump-up CD. You may boost the CD rate once during the term.
• EverBank (formerly TIAA Bank): The Bump Rate CD is a 3.5-year term that allows a one-time rate increase.
• Rising Bank : Rising Bank has 18-month, 26-month, and 36-month terms for bump-up CDs. The 18-month and 26-month terms permit a one-time rate increase, while the 36-month term allows for two rate increases.
• America First Credit Union : America First Credit Union serves residents in Arizona, Idaho, Nevada, and Utah. The credit union has a variety of bump-rate certificate terms, ranging from three months to 60 months. You can request one rate increase with any term.
• Veridian Credit Union : Veridian Credit Union has branches in Iowa and Nebraska. The local financial institution offers bump-up CDs and jumbo bump-up CDs in 18-month, 30-month, and 41-month terms. You can request one rate change with any of these terms.
• Municipal Employees Credit Union of Baltimore: MECU has 24-month, 36-month, 48-month, and 60-month bump-up CDs. You may ask for a rate change once or twice, depending on the term.
• GECU: This Texas-based credit union has bump-up CDs and jumbo bump-up CDs ranging from 12 months to 60 months. You can ask for a one-time rate change for any of these terms.
• Andrews Federal Credit Union: This credit union has locations in Maryland, New Jersey, Virginia, Washington DC, and Washington. Its Raise Your Rate CDs come with 24-month, 36-month, and 48-month terms, and you can request a rate change up to three times during a term.

Is a bump-up CD right for you?

A bump-up CD may be a good option if you expect CD rates to rise significantly before the term ends. Frank Newman, director of portfolio construction and due diligence at Ally, points out that bump-up CDs offer more flexibility than traditional CDs in a rising interest rate environment.

"I think the advantage is it kind of mitigates the risk of missing out on higher future interest rates. With a traditional CD, you're locked into a rate over that term. Let's say you lock into a 2-year CD at 3%, and rates end up going up to 4% or 5%. In a traditional CD, you don't have the option of requesting a rate increase," says Newman.

However, Newman also points out that if you get a bump-up CD, you have to be hands-on and stay on top of the bank's rates.

If you would rather be a passive purchaser and do not want to actively monitor CD rates, a traditional CD might be more suitable than a bump-up CD. Bump-up CDs also might not be the best option if CD rates are going down or staying flat. In these situations, traditional CDs could be more appealing since bump-up CDs start off at a lower interest rate.

Bump-up CD FAQs

Are bump-up CDs worth it?

Bump-up CDs can be a good choice for savers who expect interest rates to rise. However, you will need to stay on top of interest rate news, since the only way to get a rate increase is to request it.

How often can I bump up my CD rate?

It varies by bank and your particular CD. Usually, you can request a rate increase once or twice during your term.

Can I withdraw money from a bump-up CD early?

Most banks will charge a penalty of a few months of interest if you withdraw from your bump-up CD before the maturity date.

Products in this post: Ally Raise Your Rate CD, Marcus 20-month Rate Bump CD, Synchrony Bump-Up CD