This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Would You Benefit from a Brokered CD?

Brokered certificates of deposit (CDs), much like their name suggests, are CDs that a broker buys from a bank on your behalf. Adding a middleman can increase the annual percentage yield (APY) you earn on your cash, but it also means you might have to do a little bit more research before handing over your money.

Here are a few things to consider before buying a brokered CD.

How They Work
Buying a traditional CD typically involves shopping around for the best interest rate offers from local institutions -- which is as easy as entering your ZIP code at BankingMyWay.com's CD section. But with a brokered CD, your broker does the shopping for you, and will look for the best interest rates offered across the nation instead of just in your backyard.

Higher Rates
The average APY on a traditional 12-month CD is currently 1.6%, but brokered CDs tend to do even better. "A brokered CD can get you around 20 basis points higher than a CD you could get on your own," says Cliff Michaels, president of Institutional Investment Advisors Corp., a New York-based independent financial planning and investment management firm. (A basis point is one hundredth of one percentage point.) "But it depends on what deals are available when you go to buy the CD. Generally speaking, the best rates come from the same institutions, such as Capital One (COF - Get Report) and Discover (DFS - Get Report)."

What to Look For
As with traditional CDs, it's important to look beyond the APY when choosing a brokered CD. For starters, make sure the lender offering the CD is FDIC-insured and that the CD is not-callable. If interest rates drop, banks can redeem callable CDs -- thus negating the benefit of locking in a decent rate over the long term.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
COF $81.30 -0.25%
DFS $55.81 -0.84%
SCHW $34.88 -0.88%
AAPL $121.30 -0.87%
FB $94.01 -1.26%

Markets

Chart of I:DJI
DOW 17,689.86 -56.12 -0.32%
S&P 500 2,103.84 -4.79 -0.23%
NASDAQ 5,128.2810 -0.5040 -0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs