What are Brokered CD Rates – What is a Brokered Certificiate of Deposit
Sometimes banks will allow a brokerage firm to sell a certain amount of CDs on the bank’s behalf. In this case, the bank will then pay a commission to the brokerage firm due to the large amount of the CDs that they sell. As the name suggests, brokered CDs are brokered. What this means is that someone such as your financial advisor will survey the market and find the best CD rates available for your situation.
Specifics of Brokered CDs
You purchase brokered CDs in a similar fashion to buying other fixed income investments. In many cases, there is a limited supply. And, there might also be a minimum order size required, such as $10,000. Brokered certificates of deposit can also be traded in the secondary market. When you purchase a certificate of deposit through a brokerage, your information actually goes on record with the broker and not with the issuing bank.
FDIC Insurance and Brokered CDs
The same type of FDIC insurance that applies to CDs purchased from banks applies to brokered CDs. Your CD account is covered up to a cap limit of $250,000 per individual, per bank. Therefore, if the issuer of your brokered CD fails, you are covered
Benefits of Purchasing Brokered CDs
There are some benefits to purchasing brokered CDs over bank certificates of deposit or even those from credit unions. First, brokered CDs typically offer the highest CD rates – in fact, it is likely that the rates are better than those of bank certificates of deposit or even credit union certificates of deposit. This is due to the wider variety of CDs you have to choose from.
For example, purchasing CDs through a brokerage firm allows you the option of purchasing the CDs from a wider range of different banks, while keeping your account at just one brokerage firm. This technique could also allow you to spread out your FDIC insurance coverage. If you spread your CDs among different issuing banks, you will be covered up to the cap limit of $250,000 on CDs purchased from each of the banks.
Where to Purchase Brokered CDs
You can find brokered CDs through numerous types of professionals, such as financial advisors, brokers, financial planners, and financial consultants. You may also be able to find brokered CDs via online financial institutions.