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.

INVESTOPEDIA EXPLAINS '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. Federal Deposit Insurance Corporation ...

    The U.S. corporation insuring deposits in the U.S. against bank ...
  3. Interest Rate

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

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

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

    A savings certificate entitling the bearer to receive interest. ...
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 is the difference between compounding interest and simple interest?

    Interest is the cost of borrowing money, where the borrower pays a fee to the owner for using the owner's money. The interest ... Read Full Answer >>
  4. What is the relationship between modified duration and interest rates?

    Modified duration is a formula that measures the value of a bond in relation to changes in interest rates. Modified duration ... Read Full Answer >>
  5. How does inflation affect a company's short-term investments?

    Inflation marginally erodes a company's short-term investments. Short-term investments are typically ultra-safe liquid assets, ... Read Full Answer >>
  6. Other than my savings account, what other types of holdings compound my interest?

    Investors and savers can use the power of compounding interest to accumulate wealth over time. Unlike simple interest that ... Read Full Answer >>
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. Investing Basics

    Treasury Inflation-Protected Securities (TIPS)

    Treasury inflation-protected securities are treasury securities that make adjustments for inflation as reflected in the Consumer Price Index.
  4. Investing Basics

    What is the Coupon?

    In the financial world, “coupon” represents the interest rate on a bond.
  5. Retirement

    Facing Retirement? Look Beyond 100% Bonds

    Retiring doesn't mean putting all your money in bonds. There are two things to consider when it comes to be invested in bonds: growth and inflation.
  6. Mutual Funds & ETFs

    Is the PowerShares (PFEM) ETF a Good Bet Now?

    What you need to know if you are considering trading PowerShares Fundamental Emerging Markets Local Debt ETF.
  7. Mutual Funds & ETFs

    Anatomy of Emerging Markets Debt ETF (EMLC)

    This emerging market bond ETF offers a high yield, but there are dangers. Find out why.
  8. Trading Strategies

    How to Pick the Best Dividend Stocks

    Dividend stocks can make you rich, but you have to be patient.
  9. Trading Strategies

    4 Quality Dividend Stocks You Need to Consider

    Looking for quality stocks that also pay dividends? Consider these four.
  10. Trading Strategies

    Are These the Top Monthly Dividend Stocks?

    Interested in monthly dividends? Here are two stocks to watch.

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center