Dedicated to Deposits: Deals, Data, and Discussion

4.45% 24-Month CD at Charles Schwab


Charles Schwab is offering some high rates on its brokered CDs. The most competitive rates as of 7/16/08 include a 4% APY 12-month CD, a 4.45% APY 24-month CD, a 4.60% APY 36-month CD and a 5.50% APY 10-year CD.

Schwab CD OneSource is a marketplace of CDs from FDIC-insured banks across the country. As is described by Schwab, you can purchase CDs online in your Schwab account as you would a stock or mutual fund.

For an overview of brokered CDs, refer to this article and this FDIC article. One of the risks of brokered CDs is that if you need to make an early withdrawal, you'll have to sell it at the current market rate which could be at a loss. One benefit according to Schwab is that there are no early withdrawal penalties.

Another risk with brokered CDs is that you may overlook that the brokered CD is at a bank where you already have an account. This could put you over the FDIC limits.

Another potential problem is that if the bank that holds your CD fails, it can take over a month to get back the money. The FDIC needs the brokers to provide detailed customer account information. This is what happened when ANB Financial failed in May (see post). One of my readers reported about his ANB Financial CD that he bought at Schwab:
I have a brokered ANB CD at Schwab and I've been told I will have to wait 4-6 weeks for my money. I'm not a happy camper. I won't ever buy another brokered CD again. I've researched all the banks in which I had brokered CDs and sold the one I had with IndyMac. Fortunately I got par.

He's probably glad that he sold the one with IndyMac.

  Tags: CD rates

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Comment #1 by Anonymous posted on
I think these CDs are for Charles Schwab clients only, am I wrong?

Comment #2 by Banking Guy (anonymous) posted on
Banking Guy
Yes, I believe you would need to open their brokerage account.

I should have also mentioned Schwab's brokerage and checking package. However, their "high yield" checking is now paying only 2.01% APY (see my account review).

Comment #3 by Anonymous77 (anonymous) posted on
Re: "4% APY 12-month CD" . . .

I have not seen this rate at since reading about it here on Wednesday. Highest shown has been 3.85%.

Could the rate have disappeared by the time you wrote about it?

Comment #4 by Banking Guy (anonymous) posted on
Banking Guy
It appears these CD rates can change daily. I noticed the 12-month CD was 3.80% APY last Friday based on Google's cache.