CDs bought at the bank versus the same bank's brokered CDs.

[Brookswood]

It seems that banks are offering better CD rates through brokers such as Fidelity and Charles Schwab than at the actual bank.

https://www.wsj.com/articles/banks-...t-not-to-regular-customers-11666553764?page=1

This is just a heads up to those who are willing to put some effort into looking at earning more interest on their bank deposits. Needless to say you need to do your homework and make sure you understand what you are buying. Nobody else looks out for your money as well as you do.

JPMorgan Chase JPM 0.39%increase; green up pointing triangle & Co. offers most of its customers a one-year certificate of deposit paying a 2% interest rate. The bank recently offered clients of broker Fidelity Investments a nearly identical product—at 4.5%.

There are some differences. Customers who want to get out of a brokered CD before the term ends must sell the product on a secondary market, said Richard Carter, vice president of fixed income at Fidelity. Some also have a feature where a bank can choose to return a customer’s money, with interest, before the end of the term, he said.

Leigh Gathright was scanning the investment options in her Charles Schwab brokerage account earlier this year when the CD rates caught her eye. Ms. Gathright, 61 years old, last purchased a CD in the 1990s. The rates offered on Schwab were about double what her local bank advertised.

 

[Brookswood]

Do you have a big chunk of money sitting at a big name bank earning less than 1%?
Do you think that a two year CD paying 2.2% is a good deal?

If so, I implore you to Wake Up.

You can get much higher interest rates with full FDIC insurance at many internet banks and with CD's from various brokerage houses such as Schwab and Fidelity.

From an article in the Wall Street Journal today.

The five banks—Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., U.S. Bancorp and Wells Fargo & Co.—paid an average of 0.4% interest on consumer deposits in savings and money-market accounts during the quarter, according to S&P Global. The five highest-yielding savings accounts paid an average of 2.14% during the same period, according to data from Bankrate.com.

Even 2.14% today is not that great. I get 3% on an FDIC account at Ally Bank.

In theory, savers could have earned $42 billion more in interest in the third quarter if they moved their money out of the five largest U.S. banks by deposits to the five highest-yield savings accounts—none of which are offered by the big banks—according to a Wall Street Journal analysis of S&P Global Market Intelligence data.

I recently purchased a three year CD from an FDIC insured bank via Fidelity. This CD pays about 4.3%. You can get a one year FDIC insured CD from Ally Bank that pays 4%.

I just hate seeing some seniors who have a few hundred thousand stashed away, pinching pennies every time they go to the store, while their bank pays them 0.4 percent. That's a measly $400 on every $100,000 they have in the account. Yet the same money in an Ally bank account at 3% would earn $3000. In a 1 year CD bought via Schwab it would earn over $4000 a year.

 

[Brookswood]

And don't forget Ibonds which now pay the inflation rate plus 0.4% extra.
We haven't had the extra for several years. It's nice to see it back.

But, keep in mind the restrictions:

1. You must hold for one year.
2. Selling the bond within five years will cost you 90 days of interest.
3. You don't get the interest until you redeem the bond. So they are not good for those needing regular income.