What is a Bump-Up CD?

A bump-up certificate of deposit (CD), also called a step-up CD, is a certificate of deposit that allows the owner to “bump up” the interest rate if rates should rise during the CDs’ holding period.

A bump-up CD will typically offer a slightly lower rate than a CD without the option, due to its flexibility.

How a Bump-Up CD Works

A bump-up CD functions just as a traditional CD, with one small twist: you may elect to increase the interest rate once during the term of the CD. Longer term CDs may allow multiple bump-ups.

With the purchase of a conventional CD, you are locked in for a fixed period of time at a fixed rate, only to collect principal and interest at the end of the term. You may withdraw funds sooner but will incur a penalty.

Bump-Up CD Example

Let’s say a bank issues a certificate of deposit with a 7-year maturity date and a bump up option. At the time of purchase, the interest rate on the CD is set at 2.5%. Two years later comparable interest rates are now 3.5%. Investors may exercise their bump-up benefits, and increase their yield to the higher rate of 3.5%.

Is a Bump-CD Right for You?

A bump-up CD is a good option for an active investor who understands interest rate trends.

Ask an Expert about Bump-Up Certificate of Deposit (CD)

All of our content is verified for accuracy by Rachel Siegel, CFA and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Bump-Up Certificate of Deposit (CD).

Be the first to ask a question

If you have a question about Bump-Up Certificate of Deposit (CD), then please ask Rachel.

Ask a question
Rachel Siegel, CFA
Rachel Siegel, CFA
Expert Certificate

CFA Charterholder

Academic Director, Bloomberg

Rachel Siegel, CFA is one of the nation's leading experts at ensuring the accuracy of financial and economic text. Her prestigious background includes over 10 years creating professional financial certification exams and another 20 years of college-level teaching.

Verified Content You Can Trust
verified   Certified Expertsverified   5,000+ Research Pagesverified   5+ Million Users