Banks generally issue large blocks of CDs to brokerages, who then break the blocks up to re-sell to their customers. Since the brokerages purchase the CDs in large blocks, they may be able to negotiate higher rates than an individual customer can get from a bank. The brokerages generally re-sell the CDs to their customers without fees.

Brokerages re-sell these CDs without fees because they want to keep their clients money within the brokerage. When the CD expires, the money is still with them, and can be re-invested in stocks, bonds, or another product that they offer.

A Brokerage CD is usually FDIC insured by the original issuing bank.

For consumers, a brokerage CD offers the following benefits:

• Convenience. The convenience of buying more than $100,000 in CDs from one location and keeping all of the money FDIC insured. A consumer could buy three $100,000 CDs from three different banks using one brokerage. Because the CDs were originated from three different banks, the full amount would be FDIC insured. These CDs are then housed in one place and not at three separate banks.

• Potentially Higher Rates. Brokerage CDs generally pay above market rates because the brokerages have negotiating power with the banks

• Liquidity. Brokerage CDs may be able to be resold before their maturity date (instead of redeemed), allowing you to withdraw your money without penalty. Depending on current interest rates, your CD may be worth more or less than what you paid for it. .

In addition to the advantages, we saw one huge disadvantage to brokered CDs in 2008, 2009 and 2010 as many banks went under and were acquired by other banks through FDIC-managed sales or transformations. CDs purchased directly with banks like IndyMac or Wachovia were transferred to CDs with the same terms from the acquiring / resulting institution. However, brokered CDs were ordinarily paid out on the date the bank ceased to exist. As we were in a falling interest rate environment, proceeds from brokered CDs could not be readily invested at the same rate.

In addition, brokerages often offer more exotic CD products. Below are some of the different types of CDs offered by brokerages:

Callable CD

Callable CDs usually offer a higher rate of interest because the issuer reserves the right to buy them back at some point in the future. For example, if interest rates drop, the issuing bank may decide that it can borrow money for less than it is paying on some of its CDs, and it may buy back those CDs. Most callable CDs come with at least a year of call protection.

If you want to lock your money in for a certain period of time, and believe interest rates are going to rise in the future, these may be good bets. You are effectively "selling" the call feature in return for which you will receive a higher rate of return.

Zero Coupon CD

Zero Coupon CDs do not pay interest over the term of the CD or have a coupon. Instead, you buy the CD for discount over its face value and when it matures you get the full face value. So, you might buy a 5-year, $20,000 CD for $15,000 and when the CD matures you would get the full $20,000.

The biggest disadvantage to so-called Zeros is that the income is taxed annually by the IRS. So you will need to pay taxes on the income you are earning without receiving the income until the maturity date. Zeros therefore are most effective when held in a tax-exempt account.

Secondaries

These are CDs that you can purchase from others on the secondary market. The prices of these CDs depend on the direction of interest rates, the credit worthiness of the issuing bank, and other competitive products.

Selling a Brokerage CD

If you plan on buying Brokerage CDs with the intent of selling them, then you should consider several factors.

1) What do you think will happen with interest rates? If interest rates drop, the value of your CD will drop with it.

2) The credit worthiness of the issuing bank. A large percentage of secondary market brokerage CDs are purchased by large institutions who only want CDs issued from highly rates banks, regardless of whether they are FDIC insured.

3) Ask the broker to check the value of similar issues on the secondary market.

In general, as with all cash equivalent investments, be sure to run the numbers and take into account the other benefits and drawbacks of the investment before making a decision. You should also talk to a certified investing professional who can help you evaluate your choices.

Everyone has noticed that good CD rates are getting harder and harder to find. Many of the best rates out there that are offered by Internet-only banks, generally because they are able to keep their overhead costs down easier since they only operate on the Internet. One bank prides itself so much on being an Internet-only bank even has the name Internet in its title: Bank of Internet.

Bank of Internet is headquartered in San Diego, California, and it has been FDIC insured since 2000. Their CD rates rival some of the best offered today: 1.110% APY on a 6-month CD, 1.410% APY on a 12-month CD, and even 2.540% APY on a 60-month CD. Interest is compounded daily, it offers free electronic transfer of interest, and gives an auto renewal with a 10 day grace period. Of course, there are fees for early withdrawal of principle before the maturity date. A $1,000 minimum balance is required for all CD products. This bank also offers free online checking and ATM refunds as long as your balance is $5,000 or more with a 0.71% APY (with a $500 minimum opening deposit) and it has an online savings account that pays 0.75% APY with the $100 minimum opening deposit.

Of course, not everyone is comfortable with the idea of having an account at a bank with no physical offices that they could visit. Bank of Internet does offer telephone customer service, so you would be able to speak with somebody over the phone. However, if you like doing business the face-to-face the old-fashioned way, this could be a poor substitution. Before you pick the right banking account for you, you should consider not only the bank’s rates, but also consider how comfortable you would be with the bank’s format.

For the best information on CD rates, please click the CD tab above.

Being an avid saver has its advantages and disadvantages. One of the advantages is that I have money for a rainy day. One large disadvantage is that I am able to notice the recent decline in interest rates. Everyone is excited that mortgage rates are fantastically low, but what is often overlooked is the fact that the decrease in bank revenue is passed to the consumers.

I save lots. Not nearly enough, but save through a variety of mediums. One of which is through CDs. It is through CD laddering that the decline of interest rates becomes most apparent. Personally I have a six rung ladder, staggered every six months. (I.e. 6, 12, 18, 24, 30 and 36 month CDs to begin.) Once each CD matures, it is replaced with a 36 month. Therefore, every six months a new CD is opened.

The concept of the CD is simple in that one often receives slightly higher rates than a savings/money market account and post the financial armageddon one would assume that rates would either rise or maintain a status quo scenario. Unfortunately they have not. Once the Federal Reserve rate declined to a floating 0% - .25% scale, we, I, assumed that rates had bottomed.

So, what does this mean to the saver? There are few places one may save. We are currently in a dystopian environment. Some argue that equities are cheap, but one runs the risk of losing in the stock market. Some may argue that real estate may reap value, but one must have initial capital and be willing to hold for the long term. Some may say commodities, but how far can gold go and at what cost? One could play the arbitrage game in forex trading, but the risks out weight the rewards.