Promotional CD rates offer annual percentage yields (APYs) far higher than average CD rates with the same low-risk profile. They’re offered by many banks and credit unions and can give your short-term savings a boost. Here’s everything you need to know about finding and taking advantage of promotional CD rates.

What Is a Promotional CD?

A promotional CD, also known as a bonus or special-rate CD, offers higher-than-average yields and for a shorter period than traditional CDs—typically a few months to a couple of years. Banks and credit unions offer promotional CDs to attract new deposits, although you may have to open them by a certain date or meet certain conditions to qualify.

Here’s a rundown of their key features:

  • Unconventional terms. Traditional CDs are generally offered in terms such as three, six or nine months and one, three or five years. Promotional CDs might have unusual terms like 11 or 19 months. The terms are usually short, making them a good option for short-term savings goals.
  • No obligation past the promotional period. Once a promotional CD matures, you can collect your money, plus interest, or roll it into a new CD at any financial institution.
  • May renew automatically. Promotional CDs may renew automatically unless you withdraw your money during the grace period after the CD matures. If you forget or don’t take any action, the bank or credit union will likely roll your funds into a standard CD with the same term. This standard CD will often offer a lower rate.
  • May require higher deposits. Some banks require a higher deposit on their promotional CDs compared to their traditional CDs.
  • May require you to be a customer. Some banks and credit unions may require you to be a current customer to open a CD or receive the best promotional rates.

How Does a Promotional CD Work?

Like savings accounts, promotional CDs earn compound fixed interest, which means you earn interest on the principal and on your interest. Most CDs compound interest daily or monthly and credit the account monthly. But unlike savings accounts, the APY on a promotional CD stays the same for the entire term, so you know exactly how much you’ll earn.

For example, if you deposit $5,000 into a promotional CD offering 5.00% APY for 11 months, you’d earn $229 at maturity. Meanwhile, an average CD rate of 1.35% APY would only yield $62 during the same time period. You can use a CD calculator to figure out much you’d earn with different deposit amounts and APYs.

Keep in mind that some banks may require you to invest a minimum amount, such as $5,000, or lock up your funds for longer than a year to get the highest promotional rates. If you need to withdraw your funds early, a penalty will apply.

Banks insured by the FDIC offer deposit insurance up to $250,000 per account, per person and per ownership category. That means your funds—whether they’re in a traditional or promotional CD account—will be protected against bank failure. Credit union CDs are insured up to $250,000 per person through the NCUA.

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How To Get a Promotional CD Rate

Getting a promotional CD rate is as easy as shopping around and opening an account. Here are the typical steps you’d take:

  1. Compare rates. Start by comparing promotional CD rates from different banks and credit unions for the term length you prefer.
  2. Open a CD account. Visit the bank’s website or go to a local branch to open the CD account. Many banks offer online applications.
  3. Provide your information. Be prepared to provide personal information, a government-issued photo ID and your Social Security number.
  4. Deposit your funds. If you’re approved for a CD, you can typically fund it using cash, a check or a transfer from an external account. However, online accounts typically don’t allow cash deposits.

When a promotional CD may be a good idea:

  • Your savings horizon is less than two years.
  • You want a low-risk investment backed by deposit insurance.
  • You want to earn a guaranteed APY.

When it may not be a good idea:

  • You want a long-term investment for retirement.
  • You may need to access your funds before the CD term ends. If so, a high-yield savings account would be a better choice.

How To Get the Highest Promotional CD Rate

To find the most competitive rate on a promotional CD:

  • Shop around. Use a search comparison tool to find the best CD rates for the deposit amount and term you’re looking for.
  • Consider an online bank. Because they have lower overhead costs, online banks typically offer the most competitive rates.
  • Consider a CD ladder. CD ladders involve opening multiple CDs with staggering terms. You could open a six-month, 12-month and 18-month CD and split your savings across the three to take advantage of higher promotional rates on longer terms while still being able to access your money every six months.
  • Look for relationship rates. Many banks offer relationship rates, which means you can earn a higher promotional rate on your CD just by being a customer.

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