Promotional CD rates or special CD rates may be higher than standard CD rates offered by financial institutions. However, that doesn’t necessarily mean these are the best plans right now.
Here’s everything you should know before opening a promotional CD.
What are promotional certificates of deposit (CD) rates?
CD (certificate of deposit, promotional) rates, also known as bonus CD rates, are above-average CD yields offered by banks and credit unions to attract new deposits. Usually, this promotional rate is limited to a specific deposit amount or a specific shorter time period.
Emotional CD tariffs or CD specials can have the following characteristics:
- Higher interest rates and shorter maturities. For example, a bank’s promotional rate for a seven-month term may be higher than the standard rate for a five-year term. Generally, the longer the term, the more interest you earn.
- Unconventional CD terms such as 7, 17 and 37 months. The default runtime is usually easier to remember, eg B. One, three or five years.
- Promotional price valid for original term only. CD promotions usually renew for the same or similar duration at the standard price. For example, 9 months of a special CD can be converted to 6 months of the standard price.
- Higher minimum deposit than the bank’s standard CD. For example, Wells Fargo charges at least $5,000 to open one of their special CDs and $2,500 to open their standard CD.
- No expiration date was given. Unlike bank bonuses, you won’t usually find expiration dates on promotional prizes. Treat them like normal CDs, price offers are subject to change at any time.
This is how promotional CD tariffs work
As long as the rates are competitive, promotional CDs are a win-win situation for both you and the bank. You typically earn APY over the life of the CD, but the CD may renew at the standard rate, which may be lower (assuming the standard rate does not increase upon expiration). It can also be automatically renewed for a different but similar term.
Some promotional CD programs may require a higher minimum deposit than standard CDs to earn.
When should I open the promotional CD?
There are several factors to consider before opening your promotional CD. they are:
- Account opening minimum deposit.
- The APYs you deserve.
- You may need to become a new client of a financial institution.
- There may be prepayment penalties, so make sure you don’t need the money during the term.
Calculate the difference between promotional CDs and regular CDs to see the difference in interest income.
Additional non-promotional rate increases
- Relationship Interest: Some traditional banks may offer slightly higher CD rates if you have another account (usually a checking account) with the same institution. The boost is usually small, usually less than a percentage point.
- Boost and Boost CD Rate: Both types of CDs increase the built-in rate once or twice per run. However, for boosted CDs, you may not be able to request a rate increase if the new CD rate is still lower than your current rate. (Curious about other CDs? See our post on nine types of CDs.)
- Loyalty bonus: Some banks, including Ally, offer a few percent interest rate for customers who renew their CDs.
If you’re considering a promotional priced CD, compare beforehand with high-yield online CD prices. An interest rate that one bank considers competitive may be significantly lower than the standard rates of other banks.