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How promotional (bonus) CD rates work

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Promotional CD rates, or special CD rates, may pay more than standard CD rates offered by financial institutions. Here is what you need to know before getting a promotional CD.

What is a promotional CD?

A promotional CD, sometimes referred to as a bonus 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.

Compare current CD rates to make sure the promotional CD is offering a competitive rate. 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.

Credit unions, brick-and-mortar banks and even online banks might offer promotional CDs or special rates.

However, know that promotional rates might be hard to find. That’s because many banks don’t currently need deposits.

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.
  • You should make sure you won’t need the money during 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 other 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.

A promotional CD rate may be a great rate at that bank, but it might not even be competitive with Bankrate’s national average for CD rates.

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 this can be a factor too.

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Written by
Matthew Goldberg
Consumer banking reporter
Matthew Goldberg is a consumer banking reporter at Bankrate. Matthew has been in financial services for more than a decade, in banking and insurance.
Edited by
Vice president