A promotional CD rate sometimes called a bonus CD rate is a special, higher interest rate that banks offer for a limited time. It’s designed to attract new customers or encourage existing customers to deposit more money or commit to longer terms.
Compared to a standard certificate of deposit (CD), a promotional CD can help you earn more interest on the same amount of money. However, these deals often come with extra conditions, so it’s important to read the details carefully before locking in your funds.
Simple Definition and Example
A promotional CD rate is a higher-than-normal interest rate offered on certain CDs when you meet specific requirements. These requirements might include depositing a larger amount of money, choosing a longer CD term, or already having another account with the bank, such as a checking account.
For example, imagine a bank normally pays 1.00% APY on a six-month CD. If the bank offers an extra 0.25% APY to customers who also have a checking account, that higher 1.25% APY would be considered a promotional or bonus CD rate.
How Promotional CD Rates Work
Like all CDs, promotional CDs require you to leave your money untouched for a fixed period of time, known as the term. This could be several months or several years. During that time, your interest rate is usually locked in, meaning it won’t change even if market rates go up or down.
To qualify for the promotional rate, banks may ask you to meet one or more conditions, such as:
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Making a minimum deposit (for example, $5,000 or $10,000)
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Choosing a longer CD term than usual
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Having an existing relationship with the bank, such as a checking or savings account
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Being a new customer
If you withdraw your money before the CD matures, you’ll likely pay an early withdrawal penalty. This penalty could reduce or even eliminate the extra interest you earned from the promotional rate.
Real-Life Earnings Example
Let’s say you deposit $10,000 into a 12-month CD.
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Standard CD rate: 0.25% APY → You earn about $25 in interest after one year.
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Promotional CD rate: 1.25% APY → You earn about $125 in interest over the same period.
That’s five times more interest, simply by qualifying for the promotional rate.
What Happens When the CD Matures?
When your CD term ends, you can withdraw your original deposit plus the interest earned without penalty. However, many banks automatically renew or “roll over” your CD into a new term if you don’t give instructions.
Important: when a promotional CD rolls over, it usually renews at the current regular rate, not the promotional rate you originally received. If you don’t want this to happen, you should notify the bank before the maturity date.
Pros and Cons of Promotional CD Rates
Advantages
Fixed interest rate
Once your CD is opened, the promotional rate is typically guaranteed for the entire term. This makes it easy to know exactly how much you’ll earn.
Higher returns on savings
Promotional CDs often pay more interest than regular CDs or savings accounts, helping your money grow faster without taking on investment risk.
Disadvantages
Harder to qualify
These CDs often require higher deposits, longer terms, or additional bank accounts, which may not suit everyone.
Unusual term lengths
Instead of common terms like 6 or 12 months, promotional CDs may have odd durations such as 17, 37, or 57 months, which can make planning more difficult.
How to Find and Open a Promotional CD
Promotional CD rates aren’t always easy to find. Banks usually offer them for short periods or target them to specific customers. Here’s how to improve your chances:
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Compare rates
Look at multiple banks and compare promotional offers to national average CD rates and high-yield CD options. -
Read the requirements carefully
Make sure you understand the minimum deposit, term length, and any account relationships required. -
Open and fund the CD
Many banks allow you to open a CD online in minutes. Others may require a phone call or in-branch visit.
