CIT Bank today launched a new RampUp™ line of flexible CD products. Three and four year RampUp CDs provide holders with a one-time opportunity to lock into a higher CD, if CD rates rise, during the term of the product. One and two year CD products are called RampUp Plus. In addition to the one-time rate increase, depositors can also do a one-time added deposit during the life of these terms.
CIT had previously had an adjustable 2-year CD called the Achiever CD. The RampUp products replace this and expands the product to the other terms.
In the table below, I have done a comparison of a 2-year RampUp Plus CD and a regular CD as well as a 4-year RampUp CD and a regular 4-year CD.
|
Product |
APY |
Minimum Balance |
Ability to increase APY |
Ability to add funds to CD |
|---|---|---|---|---|
|
CIT 2-Year RampUp Plus |
1.20% |
$25,000 |
Yes |
Yes |
|
CIT 2-Year Regular CD |
1.25% |
$100,000 |
No |
No |
|
CIT 4-Year RampUp CD |
1.70% |
$50,000 |
Yes |
No |
|
CIT 4-Year Regular CD |
1.80% |
$100,000 |
No |
No |
Looking at the chart, the difference between the 2-year RampUp and a regular jumbo CIT CD is 5 basis points, the difference between the 1.25% and the 1.20% APY. To put a dollar cost to this, on a $100,000 deposit, you will be paying about $25 per year for the RampUp flexibility and $71 over the 2-year term if the rate doesn't reset.
The difference for the 4- year CD is 10 basis points. On a $100,000 deposit you will be paying about $70 per year for the RampUp flexibility and over the life of the CD about $295 if the rate never resets higher.
How do these RampUp rates compare to other banks' regular CDs. CIT generally has amongst the highest CD rates for any given term and even with the RampUp option, still remains at the top of the rate tables. You can see this by viewing the 2-year cd rate table and the 4-year cd rate table.
Is the ramp up option something you would use? Will CD rates go higher? These types of CD options have been around for several years and in the past they weren't of much value because rates were falling, not rising. But the interest rate environment has changed, and rates on longer term CDs (3 years and over) have been going up (see my 2014 savings rate outlook). If the economy continues to strengthen, as many predict, then rates will go up across all terms and the ramp up option will have some value. At this point, it's probably a good idea to have this type of flexibility, especially at such a relatively low cost.
Conclusion
With competitive base rates and an option to adjust upward, CIT's RoundUp CDs are a compelling addition to what is already a pretty competitive CD offering from the bank. Depositors should take a look at them when considering putting money into a CD product.
For the sake of disclosure, CIT is an advertiser on BestCashCow although they did not pay for this article to be written.
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