A brokered CD is a certificate of deposit that is sold through a brokerage firm or other financial intermediary who offers clients CDs from multiple different institutions. This is in contrast to a traditional bank CD where the bank offers their client’s CDs directly from the bank and no other options. Here is a video overview with the text transcript below the video:
To see a list of high yielding CDs go here.
Brokers will charge you a fee for their services in trying to find better CD deals for you. This may be a fixed fee or a percentage of the total deposit you want to make. Typically, the fee is included into the annual percentage yield (APY) of the brokered CD. The yield you see will then depend not only on how much the financial institution issuing the CD wants to offer, but also on how much the broker or any other intermediary wants to make on the transaction.
In many respects, a brokered CD is the same as a CD you would buy directly from your bank or credit union. One difference between most other CD’s however is that you can trade most brokered CDs in the secondary market where, like other tradeable CDs, they behave like bonds. This means that interest rates going up will decrease the market value of a brokered CD and vice versa. Like other types of CDs, If you hold a brokered CD to maturity then the value of your CD is not affected by interest rate fluctuations.
One aspect requires particular attention. You may be dealing via an intermediary for buying your brokered CD, but you should still verify that the issuing institution is safe; an FDIC-insured bank or an NCUA-insured credit union, for example. If a brokered CD interest rate being offered is significantly above comparable products, make sure you know what risk is attached and if this is acceptable to you.
Another approach that gives you the opportunity to earn higher yields is auction CDs. An example of this is Zions Direct CD Auctions with its listings of CD offerings from different financial institutions. The CDs are auctioned off in $1,000 units. To make a bid to buy a number of units: