NBD Bank has introduced a certificate of deposit that offers a guaranteed rate increase for each year of its five-year term.

The Detroit bank, the lead unit of NBD Bancorp, said it is offering the Escalating Rate Certificate of Deposit because consumers want deposit products that offer more flexibility than ordinary CDs.

"Many people have moved away from CDs because of lower interest rates, yet they still want to balance their portfolios with risk-free investments. This new CD allows them to do so," said Bob Hobbs, vice president and director of NBDs retail sales and product management department.

"Even if market rates decline or stay flat, the interest rate paid on this CD will increase by a predetermined and guaranteed amount during each subsequent year," Mr. Hobbs said.

Unlike a standard five-year CD, the escalating rate CD provides an annual grace period during which funds can be withdrawn without penalty.

The cumulative yield for the five-year term is slightly less than that of a standard five-year CD, the bank said in a news release.

But that should be balanced against the grace-period feature, which provides liquidity that is lacking in most five-year CDs.

The new CD, which carries Federal Deposit Insurance Corp. coverage, requires a minimum deposit of $500 and is also available to individual retirement account customers.

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