Brokered CD vs. Bank CD: Which Should You Choose?

A bank CD is issued directly by a bank and pays a fixed rate if you hold it to maturity. A brokered CD, on the other hand, is purchased through a brokerage and often offers access to higher rates and a wider range of issuers. Brokered CDs can be sold before maturity, while bank CDs are typically held until the term ends. A financial advisor can help you compare rates and maturities to decide which option fits your cash needs.

What Is a Bank CD?

A traditional bank certificate of deposit (CD) is a time deposit you open directly with a bank or credit union. You agree to keep your funds locked in for a set period, ranging from a few months to several years. In exchange, you receive a guaranteed interest rate. Once the term ends, you can either withdraw your money or roll it into a new CD.

Bank CDs are popular for their simplicity and predictability. They typically carry fixed rates, require no ongoing management and guarantee your principal within FDIC or NCUA insurance limits.

If you withdraw funds before the CD matures, the bank usually charges an early withdrawal penalty, often a few months of interest. This discourages premature withdrawals but helps maintain stability in your returns.

What Is a Brokered CD?

A brokered CD is a certificate of deposit you can purchase through a brokerage account instead of a bank. Brokerages partner with multiple banks to offer CDs to investors. This gives access to a wider selection of terms, maturities and interest rates than typically found at a single financial institution.

Because they are available through investment platforms, brokered CDs can be easier to manage if you already hold other investments in the same account. You can buy CDs from multiple banks and consolidate them in one place, making it easier to track balances and maturity dates.

Brokered CDs are still issued by FDIC-insured banks. Therefore, they carry the same insurance protection of up to $250,000 per depositor, per bank, per ownership category.

What makes brokered CDs different is their tradability. Instead of holding the CD to maturity, you can sell it on the secondary market through your brokerage. However, doing so exposes you to interest rate risk. If interest rates rise, the market value of your CD may fall, so you sell it for less than you paid.

Brokered CD vs. Bank CD: Yield, Flexibility and Risk

Both brokered and bank CDs provide low-risk returns, but the better choice depends on whether you prioritize higher yields and flexibility or simplicity and predictable outcomes.

Both brokered and traditional bank CDs offer stable, low-risk returns. However, they differ in how you can purchase, manage and access them. The best choice for your portfolio ultimately depends on whether you value higher yields and flexibility or simplicity with guaranteed returns.

How You Buy Them

You can purchase bank CDs directly from a bank or credit union. Meanwhile, brokered CDs are available through a brokerage firm. Buying through a broker gives you access to CDs from multiple banks in one account. This makes it significantly easier to shop for the best CD rates while managing your holdings in a single place.

Yields

Brokered CDs typically offer slightly higher interest rates than bank CDs because brokerages can source competitive products from a network of nationwide institutions. This marketplace approach can help you secure better returns, especially in a rising-rate environment when banks compete for investor deposits.

However, if you plan to hold your CD to maturity, both options will pay their stated rate in full. Therefore, the difference in yield matters most if you’re comparing short-term opportunities.

Flexibility

Liquidity is one of the biggest distinctions between brokered and bank CDs.

You can sell brokered CDs before maturity on the secondary market, providing flexibility if you need to access your funds early. However, the resale value can fluctuate based on current interest rates. In contrast, bank CDs lock in your funds for the full term but allow early withdrawals, albeit with a modest interest penalty.

For example, a one-year brokered CD offering 5.1% may appear more attractive than a bank CD paying 4.8%. However, if you anticipate needing the money early, the bank CD’s guaranteed redemption may prove safer overall.

Risks

While both types of CDs are considered secure, they carry different forms of risk.

Market risk. Brokered CDs can lose value if sold before maturity when rates have risen because their secondary-market prices move inversely to interest rates. Bank CDs are not subject to market price changes.
Liquidity risk. Selling a brokered CD early depends on finding a buyer, and you may receive less than your original investment. Bank CDs guarantee your principal but charge an early withdrawal penalty instead.
Complexity risk. Some brokered CDs are callable, meaning the issuing bank can redeem them before maturity if rates fall. This, in turn, reduces your expected interest income.
Reinvestment risk. Both CD types expose you to reinvestment risk when your CD matures, so you may have to reinvest at lower rates if the market declines.

FDIC Coverage and Safety

Both brokered and bank CDs carry FDIC insurance for up to $250,000 per depositor, per bank, per ownership category. If you have multiple brokered CDs from different banks through one brokerage, you must track your total coverage to stay within insured limits.

When a Brokered CD Makes Sense vs. When a Bank CD Does

A brokered CD may make sense if you:

Prefer to keep your investments consolidated within one brokerage account.
Want access to higher yields or CDs from multiple banks without opening several accounts.
Plan to build a CD ladder for long-term income or diversification.
Don’t expect to need the funds before maturity and can tolerate market fluctuations if you sell early.

A bank CD may be the better fit if you:

Value simplicity and guaranteed principal return without dealing with market pricing.
Prefer to work directly with your bank or credit union for deposits and renewals.
Want to avoid potential confusion about call features or secondary market pricing.
Plan to hold the CD to maturity and prioritize predictability over maximum yield.

Putting this into context, the right choice often comes down to how you plan to use the money. A retiree focused on steady income and minimal oversight may lean toward a bank CD, which offers fixed returns and is typically held to maturity. An investor building a diversified fixed-income portfolio may prefer brokered CDs, which provide access to multiple issuers, a wider range of maturities and, in some cases, higher yields that can be structured over time.

Bottom Line

Brokered CDs may appeal to investors seeking higher rates, while bank CDs suit those who prefer straightforward terms and holding to maturity.

Both brokered and bank CDs can fit into a low-risk strategy. Brokered CDs often offer higher rates and more flexibility, while bank CDs are simpler and hold their value if you keep them to maturity. The better choice depends on how long you can lock up your money and how much price movement you are willing to accept.

Financial Planning Tips

A financial advisor can help align investment, tax and cash-flow decisions with your long-term goals by building a plan around income needs, risk tolerance and timing. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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