Dedicated to Deposits: Deals, Data, and Discussion

5.40% 3-Month Brokered CD at TD Ameritrade


TD Ameritrade is offering a special 5.40% APY 3-month brokered certificate of deposit. The minimum deposit is $10,000 and the maximum is $100K. The interest rate is 5.30%.

According to the promotion instructions, you open your TD Ameritrade account online, fund your account, and then once the account is funded, call 800-934-4445 to purchase the CD. The following is an important piece of the small print:
Brokered CDs available at TD AMERITRADE are deposit obligations of the issuing bank. As a bank obligation, the CDs, along with other deposits you may hold at the issuing bank, will be eligible for insurance by the FDIC. ... TD AMERITRADE will not be responsible for any insured or uninsured portion of the CD.

A general overview of brokered CDs is provided by Justin at the About's Banking/Loans blog. Here's a description of brokered CDs from the SEC site:
Although most investors have traditionally purchased CDs through local banks, many brokerage firms and independent salespeople now offer CDs. These individuals and entities, known as "deposit brokers", can sometimes negotiate a higher rate of interest for a CD by promising to bring a certain amount of deposits to the institution. The deposit broker can then offer these "brokered CDs" to their customers.

The main risk seems to be the potential loss if you need to sell before maturity. Instead of an early withdrawal penalty, you would sell the CD in the secondary market. The value that you can sell it for may be much less than you would expect. For short term CDs, this doesn't seem to be much risk.

Other TD Ameritrade Promotions

It seems you may be able to open a TD Ameritrade brokerage account by taking advantage of one of its new account bonuses before opening this CD.

One of the promotions is this $100 bonus. Open your account before April 16, 2007 and fund it with at least $25K for a $100 bonus plus 45 days of commission-free trades. If you fund it with $2K, you won't get the $100 bonus, but you will still get the 45 days of free trades. These must be funded within 30 days of account opening and it must be a new individual or joint account. Another important point, account must remain open with minimum funding for 9 months, or TD AMERITRADE may charge the account for the cost of the cash awarded to the account.

There's also another $100 bonus for opening an account before 3/31/08 and funding by 12 monthly consecutive automatic electronic deposits of $50 or more. First $50 must be deposited within 30 days of opening account.

Thanks to the reader who mentioned this CD promotion in the finding deals post.

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Comment #1 by Anonymous posted on
The fine print has the following line:
"Brokered CDs have an extended settlement period of up to two weeks."

I'm not sure what that means. I hope it doesn't mean that your money will sit idle in your brokerage account for two weeks before the CD is issued. Two weeks lost interest is a lot on a short-term CD like 3 months.

Comment #2 by Banking Guy (anonymous) posted on
Banking Guy
That's a good point. It's unclear if the money would be earning the 5.40% during this time but just not accessible, or if the money would just be sitting and not earning anything. This is something that I'll look into.

Comment #3 by Anonymous posted on
Being one of those deposit brokers, many CDs have a future settle date. Your funds wouldn't set idle with them, but you wouldn't wire them in until the settle date. This is because they end up being part of a much larger Master CD. The receiving bank only has to put one large CD on their books instead of numerous smaller ones.

Comment #4 by Banking Guy (anonymous) posted on
Banking Guy
Thanks for the info.

Comment #5 by Anonymous posted on
I just clicked the above link ,,, appears the promo has been extended to May 15, 2007.

Comment #6 by Banking Guy (anonymous) posted on
Banking Guy
Thanks for the info. The extension is to the first $100 bonus that I mentioned above with the original exp date of 4/16.

The second bonus that I list above does seem to have ended.