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Charles Schwab CDs are brokered CDs that boast high APYs and a variety of term lengths. Like other brokered CDs, Charles Schwab CDs come with some major restrictions, but could be a great option for Charles Schwab clients who want to earn fixed interest at a competitive rate. If that sounds good to you, read on to learn more about what Charles Schwab CDs have to offer.
APY = Annual Percentage Yield
6 Mo. APY | 1 Yr. APY | 1.5 Yr. APY | 2 Yr. APY | 3 Yr. APY | 4 Yr. APY | 5 Yr. APY |
---|---|---|---|---|---|---|
5.37% | 5.31% | 5.10% | 5.20% | 5.15% | 4.90% | 4.80% |
Bank & CD Offer | APY | Term | Min. Deposit | Next Steps |
---|---|---|---|---|
Member FDIC.
| APY: 5.10% | Term: 10 Months | Min. Deposit: $0 | |
Member FDIC.
| APY: 4.70% | Term: 1 Year | Min. Deposit: $2,500 | |
APY: 5.05% | Term: 1 Year | Min. Deposit: $1 | ||
APY: 5.15% | Term: 9 Months | Min. Deposit: $1 | ||
Member FDIC.
| APY: 4.75% | Term: 1 Year | Min. Deposit: $500 |
Charles Schwab offers brokered CDs, which differ from traditional bank CDs. For one, Charles Schwab doesn't issue the CD itself but rather purchases it (along with a bulk of others) from a CD provider, like a bank. Because it's not the CD issuer, Charles Schwab can shop around at many different banks, find the best CD rates, buy them in bulk, then offer them to its clients. Let's take a look at some of the pros and cons of these CDs.
PROS
Cons
While you can find numerous CD terms from different providers, Charles Schwab CDs can only be purchased in increments of $1,000. This isn't unusual for brokered CDs (most brokers require you to buy them in increments) but could be pesky if you have a fractional amount to invest, say, $2,450.
That said, buying CDs in increments does allow you to purchase them from multiple FDIC-insured banks, which could expand your coverage. For instance, buying two CDs from two separate FDIC-insured banks would give you $500,000 in total insurance.
Unfortunately, Charles Schwab isn't the best broker for CD ladders, as its longest CD term is currently 18 months. This differs from other brokerages, like Fidelity and Edward Jones, which offer CD terms as long as 10 years.
Another caveat to consider: Charles Schwab CDs don't have the luxury of compound interest. In other words, the CD rate will apply to your principal only, not to any interest you've accumulated. This is common for brokered CDs, but differs from bank CDs, which often do calculate interest on a compound model.
Finally, unlike bank CDs, you don't have to pay a penalty if you want to liquidate your CD early. Instead, you could sell it on a secondary market. Selling a brokered CD on a secondary market could take time or force you to sell it for a loss. On the other hand, if your CD's APY is more favorable than ongoing rates, you could sell it for more than its par value.
In addition to its standard CD, Charles Schwab may also offer the following CD accounts:
APY = Annual Percentage Yield
At The Motley Fool Ascent, certificates of deposit (CDs) are rated on a scale of one to five stars, primarily focusing on annual percentage yield (APY) and early withdrawal penalty fees. Our highest-rated CDs generally include competitive APYs without complex qualification tiers, low withdrawal fees, reliable brand trust and reputation, and ease of use.
Learn more about how The Motley Fool Ascent rates bank accounts.
Charles Schwab CDs are perfect for investors who have Charles Schwab accounts and want to earn fixed income with high APY. You should be prepared to lock your money up for the length of your term, however, as you could lose money if you decide to sell your CD on a secondary market.
You should get a Charles Schwab CD for the incredible CD rates that it's offering.
If you're confident a CD is the right savings product for you, then, yes, a Charles Schwab CD is worth it. On the other hand, if you're not sure you can lock your money up for the near term, a Charles Schwab CD could work against you, as you'll need to sell it on a secondary market with no guarantee you'll get your initial investment back.
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