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Term: Promotional CD rate (Bonus CD rate)

8 Aug 2014

Definition of ‘Promotional CD rate (Bonus CD rate)’

A limited-time offer of a higher rate of return on a certificate of deposit (CD) offered by banks and credit unions to attract new deposits. Promotional rates are usually available only on short-term CDs and can require a higher minimum investment. Like all CDs, they guarantee a minimum rate of return and provide the security of FDIC insurance.

Investopedia explains ‘Promotional CD rate (Bonus CD rate)’

Promotional rates are also referred to as bonus rates. They can be a great way to maximize returns for customers who are willing to move their money frequently. Investors who don’t want their money tied up for a long time should look into them. Promotional rates usually only apply to new funds, not rollover CDs. Bonus rates can nearly double CD returns, and longer-term CDs don’t always yield better than shorter-term ones when the bonus rate is factored in. Often, shorter term CDs can yield better than one-year CDs [sometimes 2-3 times the regular average annual percentage yield (APY)]. Credit unions tend to be the best source for the most generous bonus rates.

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