The brokered CDs against the bank CDs
In the past few years more and more people became interested in brokered certificates of deposit. They discovered the huge advantages brought by a certificate of deposit, so CDs became extremely famous and popular at the same time. It is not unusual to hear someone talking about the fact that he or she wants to learn more about a certificate of deposit in order to secure the money they saved. Financial specialists even recommend us to learn as much as possible about CDs and to even choose them as method of saving money and securing them.
If you don’t know much about the certificate of deposit, then you should read more about it. You will learn that it is a new type of bank account that has a fixed interest rate. However, those who choose a certificate of deposit in order to secure their money should be ready to not use the money for a determined period of time, as the money has to be left in the bank account. An early withdrawal implies a penalty and unfortunately, the penalty is considerable.
A brokered CD is the type of certificate of deposit bought by a person interested in securing the money he or she saved through a brokerage firm. You can do it personally, but this means a lot of paperwork and small details to take into account. In the end, it is better to hire a specialized firm, as it will help you save a lot of time and money. This is where the biggest difference between a bank certificate of deposit and a brokered certificate of deposit appears; a bank CD is the one directly bought by someone interested in such a CD from a bank. A brokered CD is first sold by a bank to a brokerage firm and the brokerage firm will sell it to its clients. The client’s advantage is represented by a higher interest rate. How is it possible? Well, the bank agrees to offer a higher interest rate if the brokerage firm purchase a big package of certificates of deposit.
A small disadvantage of the brokered CD is represented by the time frame. It usually is longer than the time frame required by a bank certificate of deposit, so you would have to wait longer in order to use the money. However, if you are sure that you won’t need liquidity in the near future, you get the chance to save more with the brokered CD. It depends on your needs which certificate of deposit better suits you, but you have to make sure that you direct your attention towards each and every single small detail. Even though it seems unimportant to you, it can make the difference between saving some money and saving a lot of money. In addition to the fact that it can bring you more money, a brokered CD can be resold if you ask the brokerage firm’s help.
As you can see, there are advantages and disadvantages, but financial experts consider a brokered CD as being an inspired investment.
