In the last few months since the rise of Treasury yields, we have seen much higher rates on long-term brokered CDs. In the last few years brokered CD rates couldn’t compete with CD rates you could get by going directly to a bank. That’s no longer the case for long-term CDs. I thought it would be useful to do some comparisons between brokered CDs and CDs offered directly from banks.
There are some advantages with brokered CDs. One big advantage is simplicity. You can buy brokered CDs without all the paperwork that's required when you buy a direct CD. Also, with brokered CDs you can manage multiple CDs issued by different banks from one brokerage account.
If you are concerned about the CD disclosures from banks which can restrict your right to an early withdrawal, you won't have to worry about this issue with a brokered CD in which you can sell in the secondary market. This won't protect you from a loss, but at least you will have access to your money.
Brokered CDs also have several downsides as compared to direct CDs. I reviewed some of these downsides in this blog post. Some of these downsides include added risk. The FDIC recently published a consumers guide on brokered CDs and mentioned a few potential risks. I reviewed this consumers guide and brokered CD risks in this blog post. You can reduce the risks by purchasing brokered CDs from reputable brokers like Fidelity and Vanguard.
Below are a few of the brokered CD offerings from Fidelity. Sometimes you can get higher rates from Vanguard, but for simplicity, I’m only listing those from Fidelity. I only list CDs that are call protected. Below the brokered CD list, I’ve included the best CDs that are available directly from banks so you can see how they compare for different terms.
It’s important to note that these rates change constantly, so these should be considered only a snapshot as of 8/14/2013.
Fidelity Brokered CDs - New Issue Offerings
- 10-year: 3.05% issued from Discover Bank and Goldman Sachs Bank
- 7-year: 2.50% issued from Discover Bank and Goldman Sachs Bank and other banks
- 6-year: 2.10% issued from GE Capital Retail Bank
- 5-year: 1.95% issued from Discover Bank
- 4-year: 1.40% issued from GE Capital Retail Bank
- 3-year: 1.10% issued from Ally Bank
- 2-year: 0.75% issued from Ally Bank
- 1-year: 0.45% issued from Bank of Baroda
Best Direct CDs from Banks
- 10-year: 2.00% APY Jumbo CD at Intervest National Bank
- 7-year: 1.80% APY at Discover Bank
- 6-year: 2.00% APY at Third Federal
- 5-year: 2.06% APY at EverBank
- 4-year: 1.61% APY at EverBank
- 3-year: 1.50% APY at Salem Five Direct
- 2-year: 1.25% APY at Salem Five Direct
- 1-year: 1.05% APY at GE Capital Bank
As you can see above, the best rates for CD terms over 5 years are from brokered CDs. The direct CDs take the lead at 5 years, and the lead grows as the terms shorten. So if you prefer a short-term CD, you’ll earn much higher interest rates by dealing directly with the banks. If you prefer long-term CDs with terms over 5 years, you’ll earn the best rates with brokered CDs.
To find the latest best rates of direct CDs from both banks and credit unions, please refer to our CD rate tables.