Promotional CD rates, or special CD rates, may pay more than standard CD rates offered by financial institutions. That doesn’t necessarily mean they’re the best rates on the market, though.

Here’s everything you should know about promotional CDs before opening one.

What is a promotional CD?

A promotional CD, sometimes referred to as a bonus or special CD, is a certificate of deposit with a higher-than-normal annual percentage yield (APY).

Banks and credit unions may offer a promotional CD to attract new customers. These promotions can be a good deal, but they may only be available for a limited time.

Browse top CD rates to see how the promotional CD compares to competitive market rates. The promotional CD probably won’t renew at this special rate, so make sure you re-evaluate the CD market upon renewal.

How promotional CD rates work

As long as the rate is competitive, promotional CDs may be a win-win situation for you and the bank. You’ll typically earn the APY for the term of the CD, but the CD likely will renew at a standard rate that will probably be lower (assuming standard rates don’t increase upon maturity). It might also automatically renew for a different, but similar, term.

Some promotional CD rates may require a higher minimum deposit than a standard CD to earn it.

When to open a promotional CD

There are a few factors to consider before opening a promotional CD. They are:

  • Minimum opening deposit requirement.
  • The APY you’ll earn.
  • You might need to be a new customer at the financial institution.
  • There will likely be an early withdrawal penalty, so make sure you won’t need the money for the duration of the term.

Calculate the difference between a promotional CD and a regular CD to see the difference in interest earnings.

When a promotional CD doesn’t make sense

You shouldn’t open a promotional CD without comparing rates with CDs at other banks. Just because a bank or credit union calls a CD rate special or promotional doesn’t mean there aren’t better yields available elsewhere.

No matter how good the promotional rate is, you won’t want to incur an early withdrawal penalty, so choose a CD term that’s right for you.

The bank or credit union may not make the rate available to everyone, either. The financial institution may only offer the bonus rate to attract new deposits, so whether you’re a new customer or not can be a factor too.