The CD has a 22-month term, and the APY is 0.6% higher than their 2-year term CD.
Of course I do not know what is going to happen to the interest rates for 2-year CDs. For the sake of strategizing I am willing to assume that it rises linearly.The Step-Up option may be used only once during the 22-Month term. When you request to Step-Up your 22-Month CD, the new rate will be equal to the then-current 24-Month CD rate. The new adjusted rate will be in effect from the date of request to the renewal date.
I've done some spreadsheet work, and the conclusion I come to is that, assuming that linear rise, if the 2-year rate passes the baseline for the step-up CD in month X, the best time to exercise the step-up is about midway between X and 22 months.
I also come to the conclusion that on a $10,000 CD, if the 2-year term never rises above the step-up CD's initial rate, then the CD will earn, ballpark, $475 total in interest over the full 22 months. If the 2-year rate rises to a full percentage point higher than the step-up's initial rate, the effect of exercising the step-up at the best time is to raise the total interest paid, over the full term of the CD, by less than $30. Even if it rises to two percent above the step-up's initial rate, exercising the step-up only adds $70. If it only rises to 1/2% higher, exercising the step-up only means an extra $10. In other words, it is not hugely important.
Has anyone else analyzed this or know of an analysis?