What are the benefits of brokered CDs?

If you’re in the market for a new certificate of deposit, I’m guessing you have been searching high and low for the best CD rates around. With rates so low, every basis point counts, especially if you’re locking away your money for long-term planning. While you can easily go to banks around the country and open a new CD, you can also buy CDs from brokerage houses such as Fidelity and Charles Schwab. I think it’s best to stick with big name brokerage firms. If you see rates well above national averages, take it as a warning sign. Brokerages are suffering from the same sluggish interest rates as banks, so they shouldn’t be able to offer any kind of incredible deals.

So are there really benefits to brokered CDs? Indeed.

Easy and efficient

Forget comparing interest rates and terms at 20 different banks. Because brokerages have access to a wide range of maturities at different financial institutions, you can do all your picking, choosing and financial planning via the convenience of your brokerage account. It simplifies your search.

Goodbye penalties

For CD investors, one of the biggest fears is the dreaded early withdrawal penalty. Brokered CDs typically eliminate that fear. If you want to remove your funds early, the brokerage will simply sell your certificate of deposit to another investor. While some banks have begun offering no-penalty CDs, those typically pay below-average interest.

The FDIC has your back

Brokerage CDs should still carry the FDIC insurance you would find at a bank (be absolutely sure of this before opening), so you’ll be able to invest with confidence. If you have more than $250,000 to invest, a brokerage makes it easy to take advantage of multiple banks, too, so you can spread out those dollars while remaining protected.

What do you think? Have you ever opened a CD with a brokerage? Was the process easier than going through a bank?