The American economy is in a lot of trouble, and the stock market especially has taken a serious beating. Many investors have seen the value of their stock portfolios fall by as much as 25% or more, and it’s not an easy thing to witness. As a result, many people are putting their money into things like certificates of deposit. They may not be the most exciting or profitable investment vehicle for your hard-earned dollars, but they do make a slow-but-sure profit, and they are insured by the FDIC. One type of certificate of deposit, or cd as they are usually called, is a bonus rate cd.
A bonus rate cd is also known as a multi-step cd. A bonus rate cd will change from interest rate to interest rate in steps. So, you could start off with the high bonus rate, and then see it go down, or start off with a lower interest rate and see it go up. A bonus rate cd that begins with the higher interest rate is known as a step-down bonus rate. The opposite is known as a step up bonus rate cd. In either scenario, you’re getting a predetermined higher-than-average interest rate for a set amount of time.
Bonus rate cd’s are often offered by banks and other financial institutions to tempt investors into buying their products. For example, a bank may offer a cd with standard terms and interest rates, and then offer a bonus rate cd along with it (that you must buy, of course).
To learn more about bonus rate cd’s and other financial terms, concepts, and products, be sure to call or meet with a financial advisor. He or she can explain to you what it all means, and most importantly, how you can profit from them. When it comes to investing your money there’s no such thing as “too much information.”