You can increase your CD rates by investing in alternative types of CDs. While traditional CD rates offer steady, conservative income, there are many kinds of CDs that are customized to increase liquidity or capitalize on higher interest rates.

Traditional CDs
A traditional CD requires that the investor deposit a predetermined amount of funds for a mutually agreed upon term. Those funds grow according to a fixed interest rate. Once the CD has matured, the investor has the option to both cash out the fund or rollover the CD and begin the process again. Investors are usually permitted to deposit additional funds into the CD before the maturity date. However, banks levy stiff penalties against account holders who withdraw money from CDs before the CD has matured.

Bump Up CDs
Bump-up CDs are a type of CD wherein investors can upgrade their CD to capitalize on higher interest rates. Let’s assume that you buy a 4 year CD at 1.00% APY. However, two years into your CD, the bank starts offering 4 year CDs at 1.5% APY. If you have a bump-up CD, you can notify the bank that you wish to obtain the higher interest rate, and the bank will comply. Usually, you are only permitted to bump-up one time.
There is one disadvantage to bump-up CDs, however. Banks usually offer a much lower initial APY for bump-up CDs. This means you need to be absolutely sure that interest rates will rise before you buy bump-up CDs.

Liquid CDs
Liquid CDs permit account holders to withdraw funds from their CD without incurring any penalties. Investors are required to maintain a minimum balance, and interest rates on liquid CDs are usually higher than money market interest rates, but lower than traditional CD rates.

Zero Coupon CDs
Finally, zero coupon CDs offer investors the opportunity to buy CDs at deep discounts to par value. This means you won’t receive interest payments, but you will receive the full face value of the CD once it has matured. So, if you buy a 4 year $50,000 CD for $10,000, you won’t get any interest, but you will receive $50,000 when the CD has matured.