What Is the Difference Between Brokered CDs and Non-Brokered CDs?

Learn the key differences between brokered CDs and non-brokered CDs, including purchase methods, interest rates, and investment options.

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The difference between a brokered CD and a non-brokered CD primarily lies in how you purchase them. Brokered CDs are sold through brokerage firms, offering access to CDs from banks across the country, potentially securing higher interest rates. They may offer more flexibility in terms of maturities but might have higher minimum investment requirements. Non-brokered CDs are purchased directly from a bank, offering straightforward, fixed-term investments with a guaranteed rate of return. However, your investment options are limited to the offerings of that particular bank.

FAQs & Answers

  1. What are the advantages of brokered CDs over non-brokered CDs? Brokered CDs typically offer access to a wider range of banks and potentially higher interest rates, along with more maturity options, compared to non-brokered CDs.
  2. Can I sell a brokered CD before it matures? Yes, brokered CDs can often be sold on the secondary market through the brokerage firm, whereas non-brokered CDs usually require you to hold them until maturity or pay an early withdrawal penalty.
  3. Are brokered CDs covered by FDIC insurance? Yes, brokered CDs are FDIC insured up to applicable limits if issued by FDIC-insured banks, just like non-brokered CDs.

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