Step Up Your Earnings with Step UP CDs

The security and safety of investments offered by certificate of Deposits or CD’s are a great way to invest money and get good returns from their fixed interest rates clause. CDs give a limitless number of ways to expand your earnings and recently they have modified an account that has an increasing interest rate known as Step up CDs or Bump up CDs. Most people do not know that there are CDs that have increasing interest rates option but they think they are all “Time Deposits” with fixed interests. Step up CDs offer flexibility in terms of interest rates offered by the bank for CDs.

With Step up CDs, the holder of the CD is able to receive interest increments after a predetermined period of time has elapsed. Once you purchase the Step up CD the bank will inform you the percentage increase in interest rate that they will offer after a certain period of time. After the period has elapsed you will come in and ask them to step up your investment interest rates and earn more. Step up CDs are characteristically fixed between 2 years and 5 years although there are others with shorter spans of up to 18 months. The interest rates can be adjusted on short term basis or long term basis depending on your preference. Short term increments are fixed and can be of after 6 month period. Long term increments will be based on average competitive rates.

Step up CDs always sound too good to be true, but they are valid and legit improvements on the traditional CDs. However it is important that you take into consideration a few factors that play a major role in determining returns on investment while using step up CDs.  First and foremost it is important that you know the initial interest rate compared to interest rates of other traditional CDs. If the initial interest rate is too low the step up CD even after rate increments may not earn you returns as you had expected. The returns may even be lower compared to having invested in a Traditional CD. Secondly it is important that you have a detailed background on the bank’s record in adjusting rates properly and timely in accordance with changes in economic conditions.

Step up CDs can be a great way to step up earnings on investment, but it is important to have detailed information about any Step up CD or Bump up CD package before making the final decision.