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A Certificate Perfect for Rising Rates

You may have read recently that the Federal Reserve raised interest rates a quarter-point.

For many of us, the response is, “What does that mean for me?” And while it’s not hard to find answers, it can be difficult to make sense of them when so much information is conflicting.

Changes to the prime interest rate (the lowest rate at which you can take out a mortgage, credit card, etc.) will affect many different avenues of the financial world in various ways. Most changes will have no visible impact on the average person, but one area you might immediately see changes is to your savings.

It’s always nice to see an increase in your traditional savings account rate. But when markets are unpredictable and rates could go up or down, having a little certainty in what you’ll earn may help you reach your goal faster. That’s what makes certificates appealing. Share certificates, which are the credit union version of certificates of deposit (CDs) offer a guaranteed interest rate over a set amount of time. Certificate rates tend to be considerably higher than traditional savings accounts. Typically, the longer the term, the higher the return on investment.

If rates increase, you can upgrade to the higher rate once during the certificate term.

What are the potential drawbacks?

If someone decides not to open a certificate, it’s often one of three reasons:

  • It's hard to predict the future. What if rates go higher? With locked-in terms comes a different sort of risk. What if interest rates continue to increase (and current projections indicate they most likely will)? Will locking into a fixed certificate rate now get in the way of an even higher return later?
  • What if I want to add to or withdraw from the account early? Traditional certificates usually come with restrictions on adding to the balance and penalties for early withdrawals.
  • The cost of entry is too steep; I need to save money before I can open one! Most certificates require a $1,000 minimum opening balance. If you’re just starting out with your savings, it can be hard to set aside that amount.

A certificate that addresses each drawback

The team at SELCO heard these questions and answered with the Bump and Boost Certificate. This new spin on a traditional certificate:

  • Provides a one-time bump on your certificate rate. If rates increase, you can upgrade to the higher rate once during the certificate term.
  • Lets you boost your deposit when you bump your rate. You have the option to add to your starting balance when switching to a higher rate. You’ll still pay a penalty if you need to withdraw early. Depending on the term and amount of time you’ve had the certificate, however, you’ll typically only forfeit a portion of the dividends you’ve earned. 
  • Can be opened for $500. We’ve cut our normal minimum opening balance in half so it’s easier to get started today. 

For more information, check out our Bump and Boost certificates page. If you’d like to open a new certificate, you can call us at 800-445-4483, drop by your nearest branch, or sign up through online banking.  

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