What are the Differences between Bank CD and Brokered CD?

Differences between Bank CD and Brokered CD are summarized below:

Where to Buy:

• Bank CD - Purchased directly from the issuing bank.
• Brokered CD - Purchased through a brokerage firm.

How to Buy:

• Bank CD - Open a CD account at the issuing bank and make a deposit to the CD account.
• Brokered CD - Open an investment account at the brokerage firm and purchase some shares of the CD at the market price.

Ownership:

• Bank CD - You own the CD.
• Brokered CD - You have a beneficial interest in the CD.

Interest Payment:

• Bank CD - Interest is typically paid once the CD matures, allowing for compound interest.
• Brokered CD - Interest is usually paid in regular installments, such as monthly or semiannually.

Liquidity:

• Bank CD - Early withdrawal penalties typically apply if you withdraw funds before maturity.
• Brokered CD - Can be sold on a secondary market before maturity.

FDIC Insurance:

• Bank CD - Covered by FDIC up to $250,000 per depositor, per insured bank.
• Brokered CD - Covered by FDIC up to $250,000 per depositor, per insured bank.

Call Protection:

• Bank CD - Most bank CDs are not callable, meaning the issuer can not terminate them before maturity.
• Brokered CD - Many brokered CDs are callable, meaning the issuer can terminate them before maturity.

⇒ What Is APY (Annual Percentage Yield)

⇐ What Is CD (Certificate of Deposit)

⇑ Introduction on CD (Certificate of Deposit)

⇑⇑ Fixed Income Investments