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Which Pays More—Brokered or Direct CDs?

If you want to lock in one of today's historically high CD rates to enjoy for months or years down the road, you have no shortage of choices. Our daily rankings of the best CD rates include dozens of options paying 5% or better—up to a top rate of 5.75% APY. There are also offers in the mid-4% range for longer terms. These certificates are offered by federally insured banks and credit unions, and they can be referred to as direct CDs.

But you can also shop for the best CD rates at major brokerage firms, such as Fidelity, Charles Schwab, and Vanguard. The certificates they offer are called brokered CDs, and they have advantages and disadvantages we'll discuss below. But first, which type of CD pays more?

Rates for both types can change from day to day, so our comparison focuses on the best rates that are available right now. After that, the answer to which pays more also depends on the maturity term of the CD.

As you can see below, rates for CD maturity terms from 6 months to 2 years are higher on direct bank and credit union certificates. The exception on short-term CDs is 3-month CDs, where you can currently eke out a slightly higher APY with a CD from Charles Schwab. The story changes, however, for CDs with longer terms. For these extended horizons, Vanguard's brokered CDs are currently paying more than you can earn from the best direct CDs. (Schwab currently only offers CDs up to a 2-year term.)

Choose Carefully Between Brokered and Direct CDs

The primary advantage of opening brokered CDs over direct CDs is added convenience. That's because you can open numerous certificates, even if they are at different banks and credit unions, all within your brokerage account. That saves you from having to establish a relationship with each institution where you might want to open a CD. This also makes it easier for you to keep tabs on your CD portfolio, as you'll be able to view all of the certificates you own—and their maturity dates—within your brokerage account. All of your brokered CDs will also be documented in one brokerage account statement. Not surprisingly, however, there's a cost for this convenience. Often, the rate you can earn with a brokered CD is less than you could earn if you shopped around for the best-paying direct certificate. So you'll need to decide which is more important: getting a maximum return or having easier record keeping.

There is another potential downside to brokered CDs, which comes into play if you opt to cash your CD in before it matures. While banks and credit unions provide a specified policy on how they'll calculate an early withdrawal penalty, that's not the case with brokered CDs. Instead, cashing in a brokered CD before it matures requires selling it on the secondary market. Although your brokerage firm makes the selling process easy, there is no way to know how much you'll garner from the sale, making your final return uncertain.

If you are confident you can keep the CD until maturity, then this risk for brokered CDs mostly evaporates. You can then make your decision based on the rates you see when shopping around, and on how much you value the simplification of holding all your CDs in one brokerage account.

Where Will CD Rates Go in 2024?

CDs are paying near their highest rates in over 20 years. That's because the Federal Reserve aggressively raised the federal funds rate between March 2022 and July 2023 in a fight against post-pandemic inflation. When the Fed raises that benchmark rate, it triggers banks and credit unions to raise the rates they pay customers for their deposits.

But these lucky days for savers are limited. Inflation has cooled somewhat, and as a result, it's generally expected the Fed will begin cutting its benchmark rate sometime in 2024. The timing of the first decrease is unknown—but when it comes, it will certainly put downward pressure on CD rates.

Of course, as we always caution, predictions about future Fed rate moves are an imperfect science, since the Fed always makes its decisions one-by-one based on the latest economic data. And unfortunately, recent inflation readings, including an acceleration in the Fed's preferred inflation metric, could make it harder for the Fed to pull the trigger on cutting rates.

Right now, financial markets are still placing majority odds on a first rate cut arriving in June, according to the CME Group's FedWatch. But that could change at any time based on the Fed's analysis of fresh inflation and jobs data that gets released each month.

In any case, CD rates are not expected to rise at this point and mostly have a downside risk. So the sooner you can lock in one of today's top rates—either directly or with a brokered CD—the more you're likely to earn.

How We Find the Best Savings and CD Rates

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account's minimum initial deposit must not exceed $25,000.

Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.