Bump-Up Certificate of Deposit - Bump-Up CD

AAA

DEFINITION of 'Bump-Up Certificate of Deposit - Bump-Up CD'

A savings certificate entitling the bearer to take advantage of rising interest rates with a one time option to "bumping up" the interest rate paid. The bump-up certificate of deposit (bump-up CD) yields a lower rate than that of a similar certificate of deposit (CD) with no bump-up option.

BREAKING DOWN 'Bump-Up Certificate of Deposit - Bump-Up CD'

The purchaser of a bump-up CD is hoping that interest rates will go up. Once up, the holder can elect to increase the interest rate to the now higher going rate. If interest rates don't rise, there is the opportunity lost of having to keep the lower interest rate for the term of the CD.

When purchasing a bump-up CD, be sure to find out how many times you are allowed to bump-up the interest rate, and whether you have to extend the term of the CD with each bump-up.

RELATED TERMS
  1. Money Market

    A segment of the financial market in which financial instruments ...
  2. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  3. Maturity Date

    The date on which the principal amount of a note, draft, acceptance ...
  4. Term

    1. The lifespan assigned to an asset or a liability, over which ...
  5. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. ...
  6. Fixed Term

    Describes an investment vehicle, usually some kind of debt instrument, ...
Related Articles
  1. Investing Basics

    Callable CDs: Check The Fine Print

    These offer higher returns than regular certificates of deposit, but there's a catch.
  2. Insurance

    How To Create A Laddered CD Portfolio

    Laddered certificates of deposit offer safe capital and predictable cash flow, while bringing simplicity to your portfolio.
  3. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  4. Mutual Funds & ETFs

    ETF Analysis: SPDR Barclays Short Term Hi Yld Bd

    Find out about the SPDR Barclays Short Term High Yield Bond ETF, and explore detailed analysis of the fund that tracks short-term, high-yield corporate bonds.
  5. Mutual Funds & ETFs

    ETF Analysis: SPDR Barclays Short Term Corp Bd

    Learn about the SPDR Barclays Short-Term Corporate Bond ETF, and explore detailed analysis of the exchange-traded fund tracking U.S. short-term corporate bonds.
  6. Mutual Funds & ETFs

    ETF Analysis: Vanguard Intermediate-Term Bond

    Find out about the Vanguard Intermediate-Term Bond ETF, and delve into detailed analysis of this fund that invests in investment-grade intermediate-term bonds.
  7. Investing Basics

    What to Cut From Your Portfolio Right Now

    Owning stocks may shortly become too scary for your portfolio. Here's why, and here are some alternatives.
  8. Professionals

    Top 4 Ways to Avoid Muni Bond Mistakes

    Muni bonds are often perceived as safe investments. But it's important to do some thorough research before investing.
  9. Bonds & Fixed Income

    Explaining Make-Whole Calls

    A make-whole call enables a bond’s issuer to pay off a bond before it reaches its maturity date.
  10. Investing

    Payroll Processors, Regional Banks await Rate Hike

    Short-term interest rates are creeping higher, which is good news for money market fund managers, payroll processors and consumer banks.
RELATED FAQS
  1. How safe an investment is a certificate of deposit?

    A certificate of deposit, or CD, is an extremely safe investment, earning a guaranteed rate of interest and insured by the ... Read Full Answer >>
  2. Why do longer term CDs pay a higher rate than the short-term CDs?

    To address this question, let's employ the concept of distance. In the city, a short taxi ride from your hotel to a convention ... Read Full Answer >>
  3. What are the maximum Social Security disability benefits?

    The maximum Social Security disability benefits for a single eligible person in 2015 are $2,663.  What Are Social Security ... Read Full Answer >>
  4. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>
  5. What is a 'busted' convertible bond?

    In finance, a convertible bond represents a hybrid security that offers debt and equity features and risks. While a convertible ... Read Full Answer >>
  6. Who or what is backing municipal bonds?

    Municipal bonds are backed by dedicated taxes or revenue sources related to specific projects, or by the full faith and credit ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  2. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  3. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  4. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  5. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  6. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!