A certificate of deposit or CD is an investment vehicle offered by lending institutions for many investors that would like to capitalize their monies in a vehicle that has a very low risk with a slightly higher return than the average savings account.  Certificates of deposit are a commitment to leave your money invested for a specified term for a specific rate of interest. The longer the certificate of deposit terms the greater the interest rate. The more monies invested, the better the return or interest paid to the depositor.

Certificates of deposit are a commitment to leave your money invested for a specified term for a specific rate of interest.

There are other sources besides the traditional lending institution such as a bank or credit union where a CD can be purchased. Brokerage firms are a resource some investors utilize for obtaining certificates of deposit. A lender will pay a brokerage firm a commission to sell CD on their behalf. Purchasing CDs through brokerages do offer investors some advantages.

There are advantages to purchasing CDs through brokers rather than through an individual lender or lending institution. When using a brokerage an investor can buy CDs from a wider range of lenders which typically results in finding higher and more competitive interest rates. For example, using a brokerage you aren’t limited to banks in your specific area. A brokerage may find you a more competitive rate of interest at a better term because of the amount of lenders they have access to.

Another great reason for using brokerages for CDs is if you happen to be an investor that would like to invest more than currently covered by the FDIC ($250,000). Using a brokerage you are able to have your FDIC insurance coverage for more than $250,000 worth of CD investments.

Enlisting help from a financial broker certainly has its advantages; but you will incur additional fees.

FDIC or Federal Deposit Insurance Corporation is a federal organization that insures your certificate of deposit with the lender if the lender would happen to fail. FDIC covers CDs up to the maximum allowed by law, $250,000 per person per lender. FDIC coverage does protect any certificate of deposit brokered CDs or CDs obtained through brokerage firms or brokers.

Purchasing through a brokerage you can purchase a CD at more than one bank.  For instance, if you invested $280,000 in one bank, FDIC will only cover $250,000 of your $280,000 investment. If you used a brokerage for buying CDs, you can have $250,000 in Bank A certificates of deposit and $30,000 in Bank B certificates of deposit and have your total $280,000 covered by FDIC insurance.

When purchasing CDs using brokerage firms read the contract terms very carefully and understand all requirements tied to your CD. There may be fees or charges realized when working with a broker for certificates of deposit that aren’t identical to contracts when buying CDs directly from your traditional lending institution. However, there are great benefits for using brokerages for certificates of deposit for many investors.

Read the terms of your contract carefully before signing anything