What are brokered CD’s?

Certificate of deposits is one of the most appealing kinds of saving money in the bank. It is yielding high interest rates thus most people are getting attracted to it. Today there are varieties of CDs available that can address the varying needs of consumers one of which is a brokered certificate of deposit.

By the name itself we are already given an idea what it is all about. This particular type of certificate of deposit is offered by a broker or financial intermediary. Brokered CD is just like the other types of CDs where you will agree that your money will be kept for a specific term and the bank will pay you in the form of interest. The longer you keep your money intact the higher interest it will earn.

As mentioned earlier there is a middleman like your financial advisor involved in this type of CD. This person will be the one to search the market and find the best certificate of deposit rate available. With brokered CDs you will be exposed to several different banks and financial institutions offering certificate of deposits. Thus with the help of a financial intermediary you have better chances of finding the best rate available in the market. Without brokering a CD chances are you will have just limited options when it comes to the service providers you could choose from.

Buying, selling and even trading brokered CDs in secondary markets are also possible and this is another notable feature of this CD type.

Since brokered CDs necessitate the presence and service of a third wheel who can be a broker, financial advisor, financial consultants or planners, you will have to pay a fee for their service. Your broker will do all the research for rates, comparison shopping and even renewals.

There are risks however associated with brokering a CD like the risk that you will lose your fund. Most of the time the most alluring rates come with more risks thus it is best to consider understanding the entirety of the offered service prior to settling an agreement. The risk you are to take can somehow be lessened if you are sure of the credibility of the bank or financial institution you are trusting. Remember not all that glitters is gold. Go after banks that are FDIC insured. This way you are certain that your money will be safe whatever happens to your bank.

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