Certificate of Deposits (CDs): Open a CD Account Online (2024)

Purchasing a brokered CD is similar to depositing funds in a bank. In exchange for the money you pay for the CD, the issuer agrees to pay you a predetermined interest rate that's typically higher than the rates offered on savings accounts. When the term is up (when the CD matures), you get back the principal (or face amount) plus any interest that has accrued.

If you need to access your funds before the CD's term ends, you may attempt to sell your CD if a market exists. The price can fluctuate based on the current interest rate environment.

There are several factors to consider when choosing a CD. First, when do you need the money? If you need it soon, consider a CD with a shorter term. If you're saving for something five years down the line, a CD with a longer term and higher rate may be a more prudent choice.

IAlso, consider the economic environment. If it seems that interest rates may rise, or if you want to open multiple CDs, CD laddering can be a good option.

Overall interest rates may change during your CD's term. If rates rise, you miss out on earning those higher rates, since your money is committed for the CD's term. However, if rates go down, you benefit: You still earn the higher rate that was offered when you opened the CD. CD laddering (buying multiple CDs of varying term lengths) can help address this concern. It can also be a way for you to take advantage of longer terms (and therefore typically higher interest rates) while still giving you access to some of your money each year.

With a CD ladder, you divide your initial investment into equal parts and invest each portion in a CD that matures every year. For example, say Leo has $10,000. To build a CD ladder, he invests $2,000 each in a 1-year, 2-year, 3-year, 4-year and 5-year CD. As each CD matures, he reinvests the money at the current interest rate or uses the cash for another purpose. If Leo reinvests his money, he might choose a new 5-year CD, which would ensure he has one CD maturing each year as long as he continues laddering.

The market value of a brokered CD purchased through your brokerage account will fluctuate and, at times, may show a potential market value of more or less than the price you paid or face value of the CD. However, if you hold a brokered CD to maturity, you'll get back the principal amount plus interest; these price fluctuations only come into play if you sell your CD before maturity.

Note that brokered CDs held to maturity do not auto-renew. You'll need to purchase another CD if you desire.

Merrill may maintain a secondary market in brokered CDs, although it's not obligated to do so. You may be able to sell your brokered CD before it matures, but the price you receive could be less than your original investment.

Early withdrawals of brokered CDs are generally not permitted. In limited circ*mstances, such as the death of the owner of the CD, early withdrawal may be permitted.

Some brokered CDs, known as callable CDs, are subject to early redemption by the issuing bank at its sole discretion. They may offer higher yields than noncallable CDs, which return their principal at the stated maturity date. Callable CDs offer higher yields due to your risk of having your principal returned early and needing to purchase a new CD in a lower-interest-rate environment.

Brokered CDs purchased through your Merrill account pay simple interest; that is, interest is not compounded.

FDIC insurance covers all types of deposits received at an insured bank per account ownership category. FDIC insurance does not cover investments, even if they were purchased at an insured bank under the FDIC's general deposits insurance rules.

You can calculate your insurance coverage using the FDIC's online Electronic Deposit Insurance Estimator (EDIE) at www.fdic.gov/edie/

You are responsible for monitoring the total amount of deposits (including CDs, checking, savings and money market deposit accounts) that you hold with any one issuer, directly or through an intermediary, in order for you to determine the extent of FDIC insurance coverage available to you on your deposits.

FDIC insurance covers all types of deposits received at an insured bank per account ownership category. FDIC insurance does not cover investments, even if they were purchased at an insured bank under the FDIC's general deposits insurance rules.