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What are Bump Rate Certificates?

When your money makes money, it has earned dividends. There are tons of methods out there to help you to put more away in savings but smart investing will give you more bang for your buck as you strive to meet your savings goals.

If you are fortunate enough to have money to put away that you don't need to use in the near future, a bump rate share certificate might be just the ticket for you. These types of accounts allow you to earn money from rising interest rates with less risk of losing money while you grow your savings.

What Are Share Certificates?

Share certificate accounts are issued by credit unions and work in a similar way to certificates of deposit (CDs) at banks. A share certificate can help you grow your money being saved by earning what’s called dividends. During the share certificate's term or life cycle, you won't be able to withdraw your money without penalties. However, you will likely be able to earn more interest than you would if your money was in a regular savings or money market account.

When you purchase a share certificate, it will earn interest on the full amount of your deposit over a set period of time. Share certificates can be purchased for different periods of time called terms. Once your share certificate reaches its maturity date at the end of its term, you can then withdraw your money without paying any penalty.

How Do Bump Rate Share Certificates Work?

Share certificates are savings vehicles that have specific rates of interest and terms. With most share certificates, the rate of interest you will earn will remain the same throughout its term. However, a bump rate share certificate is different because it allows the owners to increase the rate of interest earned once during the life of the term*.

Bump rate share certificates through La Capitol are currently available in 16- or 26-month terms with a minimum required deposit of $1,000. If the interest rates continue to rise, you can benefit from a one-time bump in the interest rate on your account*. This allows you to take advantage of a rate increase when interest rates are continuing to climb (as they currently are)*.

Bump rate share certificates allow you to benefit from rising interest rates without worrying about what might happen if interest rates fall. When you purchase a bump rate share certificate, you do so with the expectation that the interest rates will continue to rise. If they do, you can choose to increase your interest rate from where it started to the new, higher rate, allowing you to put fertilizer on your growing savings. 

Who Should Invest in Bump Rate Share Certificates?

The amount your money can make in interest in a year is called the Annual Percentage Yield (APY). The primary reason to purchase a bump rate share certificate is to gain the ability to increase your annual percentage yield (APY) during its term. It is a good option for people who believe that interest rates are likely to rise during the terms of their share certificates.
Here are some examples of when bump rate share certificates are an excellent choice for the following types of people:

  • Those saving for a short time to purchase a new home
  • Those wanting a government-backed, safe account in which to keep money
  • Those who won't need to use the cash soon
  • Those saving to help with college and tuition expenses
  • Those who want to invest in small inheritances
  • Those wanting a place to put small gambling or lottery winnings
  • Those nearing retirement seeking low-risk investment options

Advantages of Bump Rate Share Certificates

Credit unions and other financial institutions can increase or decrease the interest they pay on savings accounts. In most cases, the changes are tied to the interest rate increases or decreases made by the Federal Reserve. Financial institutions typically reduce the interest they pay on savings accounts when the Federal Reserve reduces its rates. When interest rates are increased by the Federal Reserve, financial institutions might then pay higher APY to account holders.

Opening a bump rate share certificate allows you to take advantage of interest rate increases. The Federal Reserve is our nation’s central bank given the job to control the monetary system and avoid financial crises. Recently, the Federal Reserve has been increasing interest rates and plans to increase them several more times. A bump rate share certificate will let you benefit from a rate increase without being forced to wait for the share certificate’s maturity date to earn more.

A bump rate share certificate is a great way to help you grow your savings faster when you are trying to achieve a large savings goal. For example, if you are saving for a downpayment to buy a home in the next few years, a bump rate share certificate might help you to get there through an increase in the amount of interest you earn from your bump rate share certificate. 

Bump rate share certificates are also good choices if you are nearing retirement and want to protect your savings in an unstable market environment. Unlike stocks, these investments are less risky and can help you use a variety of methods to let your savings earn money for your future.

Start Growing Your Wealth Today

Bump rate share certificate accounts are available for a limited time. To learn more about our full range of share certificates and how they can help you, reach out to us at La Capitol Federal Credit Union today.


*Special Certificate with One-Time Bump. Limited Time Offer for terms of 16 months and 26 months one-time rate bump. Membership is required and subject to approval. Membership requires a $5.00 par share balance. APY = Annual Percentage Yield. Rates are accurate as of 8/18/2022. La Cap FCU reserves the right to end or modify this offer at any time. The annual percentage yield is a percentage rate that reflects the total amount of dividends to be paid on an account based on the dividend rate and frequency of compounding for an annual period. A withdrawal will reduce earnings. For all accounts, the dividend rate and annual percentage yield are fixed and will be in effect for the initial term of the account. The advertised Dividend Rates and APYs apply to new deposits; funds currently on deposit in a La Cap account are not eligible for this offer. The minimum opening deposit for the 16-month and 26-month Special Certificates is $1,000.00. Additional deposits are not allowed during the term of the certificate. Dividends are compounded and credited monthly. Early withdrawal penalty may apply for withdrawals before maturity. The penalty schedule is Terms of 1 year to less than 3 years 180 days’ dividends. During the term of the 16-month Special Share Certificate, you are permitted to make a one-time request to adjust the dividend rate to the effective dividend rate of the 1-year Thrifty Saver Certificate or 1-year Super Saver Share Certificate. During the term of the 26-month Special Share Certificate, you are permitted to make a one-time request to adjust the dividend rate to the effective rate of the 2-year Thrifty Saver Certificate or 2-year Super Saver Certificate. The minimum opening deposit amount of the Thrifty Saver Certificates and Super Saver Certificates must be met to adjust to the effective rate. The new dividend rate will be paid for the remaining term of the special share certificate. The term of the special share certificate will remain the same. At maturity, the special share certificate will not auto-renew, the certificate will be closed and the balance will be deposited into a transaction account. Federally insured by NCUA.

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