America’s economy is in serious trouble and this crisis is reflected in the terrible performance numbers coming from the stock market. The market as a whole has lost trillions of dollars in value, and individual investors have seen their portfolios shrink by distressing amounts. As a way to still make money and playing it safe, people are flocking over to certificates of deposit (CDs) – in particular the multi-step CD.
Before speaking about multi-step CDs, you need to know about callable CDs. A callable CD is one which an issuer can call before the CD reaches its initially agreed-upon maturity date. Basically, it means that the issuer of the CD, usually a bank, can inform the investor that the CD is at term – the maturity date is right now, not what it says in the initial CD contract. Since callable CDs can be called before the initial agreed-upon date, banks will offer higher interest rates for callable CDs than they would with a traditional CD. For the investor, it comes down to choosing a CD with a set maturity date and interest rate, or taking a gamble on a callable CD and its generally higher interest rate – but with the caveat that it can be called earlier, investors take the chance of getting called on their your higher-than-average interest rate CDs.
A multi-step CD is a kind of callable CD that offers pre-determined interest rates and interest rate increases over a period of time, divided into different call periods. So, you get your multi-step CD and at the end of a each time segment the bank can call it or not. That decision will be up to the bank.
To learn more about callable CDs and multi-step CDs, and whether they’re right for you, be sure to meet with a financial advisor and go over everything in detail before you commit your money to anything.