The Advantages of Brokered CDs
Brokered CDs are certificates of deposit sold by brokerage firms that typically offer higher yields. But they don't come without some risk.

Brokered certificates of deposits take these safe-but-stodgy investments and give them a turbo boost — they're a key way to take advantage of rising interest rates.
You buy brokered CDs through a brokerage firm. Brokered CDs typically provide above-average yields when compared with CDs offered through banks. For example, a one-year brokered CD at Fidelity yields 3.45%. A top-yielding one-year CD from a bank pays 2.80%, on average, according to DepositAccounts.com, a rate comparison site.

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.
Another pro: You’re not subject to early-withdrawal penalties. Brokerage firms that do this sort of packaging usually maintain an active secondary market for their CDs, meaning you can sell them back (by withdrawing your money) before they mature. Bank CDs have early-withdrawal penalties that range from three months’ to a year’s interest.
However, having the flexibility to sell comes with potential drawbacks. First, your proceeds from selling a CD before it matures can vary with changes in interest rates. If rates have risen, you won’t get back as much as you paid for the CD. (On the other hand, if rates have fallen, you should get more.) CDs in the secondary market act in many respects like short-term bonds: When rates rise, the values of existing bonds fall; when rates fall, bond values rise. Another pitfall is that some of these CDs may be callable, meaning that if interest rates fall, the brokerage firm may redeem or sell your CD before maturity. In that case, you’ll miss out on future interest.
You can buy brokered CDs at investment firms such as Charles Schwab, Fidelity and TD Ameritrade. Ask about the minimum requirement to purchase CDs, as well as possible fees. TD Ameritrade, for example, has a minimum requirement of $1,000, with a mark-up or mark-down price included in your price quote when buying or selling new issues. Also make sure your CD is insured by the Federal Deposit Insurance Corp. Brokerage firms typically partner with FDIC-insured banks, but not always.
Rivan joined Kiplinger on Leap Day 2016 as a reporter for Kiplinger's Personal Finance magazine. A Michigan native, she graduated from the University of Michigan in 2014 and from there freelanced as a local copy editor and proofreader, and served as a research assistant to a local Detroit journalist. Her work has been featured in the Ann Arbor Observer and Sage Business Researcher. She is currently assistant editor, personal finance at The Washington Post.
-
-
Hobby Income: What It Is and How It’s Taxed
Hobby income isn’t subject to self-employment tax, but will the IRS consider your hobby a business?
By Katelyn Washington • Published
-
Colorado State EV Tax Credit Will Soon Soar to $5,000
State Tax Breaks Colorado will offer a big tax break soon for resident taxpayers who buy electric cars and trucks.
By Kelley R. Taylor • Published
-
Inflation-Proof Your Finances
Sponsored With inflation reaching 7%, it’s important to keep a pulse on your finances with personal finance tools such as Quicken and stay educated on economic conditions.
By Quicken • Published
-
Kiplinger’s Interest Rates Outlook: Staying Up Until the Economy Slows
Economic Forecasts Kiplinger’s Interest Rates Outlook: Staying Up Until the Economy Slows
By David Payne • Last updated
-
Creating a Values-Based Financial Plan
personal finance More savers and spenders are thinking big picture when it comes to their financial decisions.
By Joe Vietri, Charles Schwab • Published
-
Donor-Advised Funds: The Gift That Keeps on Giving
Financial Planning Expert guidance on how this charitable vehicle can make a difference.
By Emma Patch • Published
-
The Best Online Brokers and Trading Platforms, 2022
online brokers Use our survey to compare investment offerings, tools, apps, advice and more to find the best online broker for you.
By Nellie S. Huang • Published
-
Don’t Panic About Interest Rate Increases: Look to Profit Instead
interest rates Here’s how to adjust accordingly to protect your investment portfolio during these times of rising interest rates.
By Adam Lampe • Published
-
Which Type of Donor-Advised Fund Is Right for You?
Charity A Q&A with an expert at DonorsTrust delves into the details to help givers do the most good with their money.
By Lawson Bader • Published
-
Best Banks for Retirees
banking With these institutions, retirees avoid pesky fees on checks and paper statements and have access to an array of additional wealth and investment services.
By Lisa Gerstner • Published