Boost Your Returns With Brokered CDs
You can earn more with brokered certificates of deposit, but shop wisely.
- (opens in new tab)
- (opens in new tab)
- (opens in new tab)
- Newsletter sign up Newsletter

Fed up with the piddling interest you're earning on bank deposits? You may want to take a look at brokered certificates of deposit.
Brokered CDs are issued by banks and sold through brokerage firms such as Fidelity (opens in new tab) and Vanguard (opens in new tab). Some brokered CDs are currently offering yields roughly 0.3 to 0.5 percentage point above what you’d earn on CDs of the same maturity purchased directly from a bank—without a lot more risk.
"Here's an opportunity to stay safe and earn extra return," says Allan Roth, founder of Wealth Logic (opens in new tab), an investment advisory firm in Colorado Springs, Colo.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Like direct CDs, brokered CDs are covered by federal deposit insurance. But they're not completely risk-free. If you need your money before the CD matures, you'll have to sell it in the secondary market, and if interest rates climb, the market value of your CD will fall.
Brokered CDs don't always offer higher yields than direct CDs, but longer-term brokered CDs have become more competitive in the past few years, says Ken Tumin, editor of DepositAccounts.com (opens in new tab). And in the past six months or so, he says, some shorter-term brokered CDs have also started offering more generous yields. As interest rates rise, "banks might try to hold off on raising direct CD rates," Tumin says, but because brokered CDs are traded in a secondary market, they "tend to respond quicker" to interest rate changes.
When shopping for brokered CDs, skip the ones that are callable. They may offer slightly higher yields, but they allow the bank to terminate the CD early, meaning you may not enjoy that yield for very long.
Also be wary of CDs with unusually high yields, and work with a brokerage firm you trust. The Financial Industry Regulatory Authority (opens in new tab) warned last year that some firms were using high-yield CD offers as bait to lure seniors into meetings with salespeople, who would then pitch a high-commission product, such as an equity-indexed annuity.
You can buy brokered CDs as new issues, which are typically sold at par, or in the secondary market, where they may trade at a premium or discount to par. Roth, who started adding brokered CDs to client portfolios about two years ago, says he has been finding the best deals in the secondary market.
Looking at noncallable secondary-market CDs offered by Fidelity in mid May, a Capital One CD maturing in May 2022 offered a yield of 2.53%, compared with 2.35% for the top-yielding five-year direct CD listed on Bankrate.com (opens in new tab). A Synchrony Bank brokered CD maturing in April 2027 was yielding 2.88%, while 10-year direct CDs offered top yields of about 2.35% and the 10-year U.S. Treasury yielded 2.41%. (Note, however, that Treasury interest, unlike CD interest, is exempt from state and local income tax.)
Rein in Risk of Rising Rates
Buy only brokered CDs that you intend to hold to maturity. Unlike direct CDs, brokered CDs have no early-withdrawal penalty, and in a pinch, you can sell them on the secondary market. But if rates have climbed, you'll likely receive less than what you paid for it.
To mitigate the risk of rising rates, Roth uses brokered CDs in conjunction with direct CDs that have mild early-withdrawal penalties, such as six months' worth of interest or less. If rates rise, he can break the direct CDs and reinvest at a higher rate.
For savers who are spreading cash among multiple banks to stay below the Federal Deposit Insurance Corp. limit of $250,000 for each type of account you hold at each bank, brokered CDs can make life simpler. You can hold brokered CDs issued by many different banks in one brokerage account. But FDIC coverage on secondary-market brokered CDs has one wrinkle: It only applies to the par value. So if you buy a brokered CD at a premium, that premium amount won’t be FDIC-insured.
If you're not spending the interest from your brokered CDs, you should regularly reinvest it. Unlike direct CDs, brokered CDs don't offer the option of adding the interest back into the principal, so you'll want to redeploy that cash to keep it from building up in a low-yielding brokerage sweep account.
-
-
Stock Market Today: Stock Market Struggles While Alibaba Shines
Tech and communication services stocks were two of the worst performers today as Treasury yields rose.
By Karee Venema • Published
-
Study Reveals the Most Trusted Banks
A recent study reveals the top 15 most trusted banks, with one bank ranking as the most trusted for the third consecutive year.
By Erin Bendig • Published
-
Best Cash Back Credit Cards March 2023
Smart Buying Looking for the credit card that pays the most cash back? These lenders may pay hundreds of dollars, with minimum hassle.
By Lisa Gerstner • Last updated
-
I-Bond Rate Is 6.89% for Next Six Months
Investing for Income If you missed out on the opportunity to buy I-bonds at their recent high, don’t despair. The new rate is still good, and even has a little sweetener built in.
By David Muhlbaum • Last updated
-
What Are I-Bonds?
savings bonds Inflation has made Series I savings bonds enormously popular with risk-averse investors. How do they work?
By Lisa Gerstner • Last updated
-
Your Guide to Open Enrollment 2023
Employee Benefits Health care costs continue to climb, but subsidies will make some plans more affordable.
By Rivan V. Stinson • Published
-
Watch Out for Flood-Damaged Cars from Hurricane Ian
Buying & Leasing a Car In the wake of Hurricane Ian, more flood-damaged cars may hit the market. Car prices may rise further because of increased demand as well.
By Bob Niedt • Last updated
-
What You Need to Know About Life Insurance Settlements
life insurance If your life insurance payments don’t seem worth it anymore, consider these options for keeping the value.
By David Rodeck • Published
-
As the Market Falls, New Retirees Need a Plan
retirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
By David Rodeck • Published
-
Retirees: Your Next Companion May Be a Robot
happy retirement Robots may help fill the gap left by a shortage of humans to help older adults live independently.
By Alina Tugend • Published