Waiting for my step-up CDs to step it up

Figures with dollar bill folded like stairs

"Been down so long, it looks like up to me," an author once lamented.

That’s my feeling about interest rates.

To exorcise this negative thinking, I’ve focused of late on step-up CDs, where it’s actually possible to go from down to up.

The best-known (certainly, the best-advertised) step-up CD is Ally Bank’s "Raise Your Rate" 2-Year product, which gives the customer the one-time option to increase the interest rate should Ally’s 2-year rates go up.

I have seven of them.

When I opened my first in 2009, I was suspicious.

I wondered what sort of games Ally could play with my step-up right.

For example, if rates climbed, could Ally freeze its rate, and offer, say, a new 25-month certificate having a higher yield, leaving me and other depositors hanging?

That wouldn’t make Ally particularly popular, but I saw no legal impediment.

I also fussed over exactly when I would exercise my step-up right. If the rate went up 10 basis points, would I immediately take it, or wait for a further increase, losing the benefit of the higher rate in the interim?

Of course, I needn’t have worried about any of this. My first RYR CD carried a 2.35% APY; the current rate is 1.50% APY. If this rate has ever increased, I missed it.

Despite ad images of soaring airplanes and balloons, Ally must be breathing a sigh of relief that rates have consistently dropped since it first offered this product.

I got a better step-up deal at Rabobank last year. Its 2-year certificate provided that, at any time after Feb. 1, 2011, I could increase my rate from 2.00% APY to either what the bank was currently offering, or 2.25%.

When Feb. 1 rolled around, I took the 2.25%, without a second thought.

I don’t mean to berate Ally. I actually think it's offering a good deal because the initial rate is generally competitive with standard 2-year online yields.

I even opened a few RYR CDs at year-end, as other Ally investments matured, because I received a "loyalty bonus" to keep my money at the bank.

But will the day ever come when I can actually raise my rate at Ally?

Only Ben Bernanke can say.

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