Bank CD’s have been around for a long, long time, so you may think you already know everything there is to know about investing in CD’s. The truth is that as interest rates fall banks have made some changes to the way traditional CD’s are handled in order to make them more appealing to investors.

Due to the long term nature of  many CD’s, it is important that you fully understand the new features of these investment vehicles before you tie up your hard earned cash! Unfortunately, some of them come with the possibility of a nasty surprise at the end of the investment term.

One way that banks are trying to get investors to buy CD’s is to offer what is known as a ‘bump-up’, ‘step-up’, or ‘rising rate’ CD. They allow investors to essentially ‘bet’ that rates will go back up. They typically pay an initial interest rate like any old CD, but if the prevailing rates do indeed go up, the CD owner can then choose to receive a higher interest rate the the remainder of the term until maturity. One thing to be aware of when looking at step-up CD’s is that the initial interest rate will often be lower than traditional CD’s are offering anyway, which can mean that even if you are able to take advantage of a rise in rates, you could still wind up making less than a traditional Certificate of Deposit. Check your local banks for promotions on these CD’s or contact PFF Bancorp or US Bancorp if you would like to find out more.