What Is a Rate Bump CD?

March 12, 2025

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A rate bump CD is a type of certificate of deposit account that allows you to request a one-time interest rate increase during your CD term. Rate bump CDs are also sometimes referred to as a bump-up CD. But no matter what you call it – this type of CD gives you an opportunity to earn more if interest rates rise. Let’s take a closer look at how they work.

How do rate bump CDs work

CDs can provide predictable returns on your savings given that they typically come with a fixed rate. That means at the end of the CD term, you get back your principal (your initial deposit) along with any interest accrued.

With a rate bump CD, however, you have the option to request a one-time rate increase for your CD during its term. Many rate bump CDs will only let you raise the rate one time during the life of the CD. However, some accounts might allow you to hike your rate more than once. Those rate bump CDs typically have longer terms, so it’s worth weighing the pros and cons of your money being tied up for longer versus scoring multiple rate increases.

Be aware that there might be rules around how much you can increase your rate at a time. Also, as with most CDs, the term lengths and minimum deposit requirements for rate bump CDs can vary from bank to bank. Before you commit to an account, check with your financial institution – and do some comparison shopping – to understand your options.

Rate bump CD example

Let’s say you’re considering a rate bump CD for a near-term savings goal. Maybe it’s for a dream vacation, a new car, or a home renovation.

You can:

Open and fund a rate bump CD at your preferred financial institution to lock in your rate (much like a traditional CD).
Bump up to a higher rate. If interest rates were to go up and your bank raised the rate it offers for that same CD term, instead of missing out on higher earnings, you could ask for a rate increase.
Earn more until maturity. For instance, if you open a 2-year CD with a 2% APY and a year later, your bank promotes a 2-year CD with a 3.5% APY offer, you can ask your bank to “bump up” your 2% rate to the new 3.5% rate for the rest of your CD term.

Is a rate bump CD right for you?

The answer will depend on a few factors like:

What is the timeline for your goal?
How much do you want to earn in return?
How long are you able to keep your money deposited? In other words, what is the CD term you can commit to?

You’ll also want to consider the potential benefits as well as drawbacks.

Pro: Interest rates can go up or down at any time. A rate bump CD allows you to take advantage of rising interest rates (should they go up) by giving you the flexibility to request a rate increase for your CD (usually just once) to the higher rate offered for your CD term.
Con: A downside is that the initial interest rate offered may be lower than that of typical CDs. Also, rate bump CDs are not as common given that not all banks offer them, and you may not have as many CD terms to choose from.

At the end of the day, no matter which CD option you decide to go with, keep these tips in mind:

Think about the length of the term you can commit to.
Find the right type of CD that fits your goals.
Determine how much money you want to deposit.
Shop around to find competitive rates.
Make sure your CD account is held at an FDIC member bank.

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this website were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.