Banks, credit unions, and brokerages all sell CDs, and the rate you get depends heavily on where you buy

You can buy a CD from a bank, a credit union, an online bank, or a brokerage firm. Each source offers different rates, terms, and features. Banks and credit unions typically offer CDs with terms ranging from three months to five years, while brokerages can access longer-term CDs and sometimes offer more competitive rates by shopping across multiple issuers. The rate you receive is not the same everywhere — a one-year CD at one bank might pay 4.5% while another pays 5.2%, so comparing before you buy matters.

Your choice also affects how your money is protected. CDs held at banks and credit unions are insured by the FDIC or NCUA up to $250,000 per depositor, per institution. CDs bought through a brokerage are still FDIC-insured if the underlying issuer is a bank, but the structure is different and the protection rules have a separate layer. Understanding where your money sits and how it is protected is as important as the rate itself.

Key Takeaways

  • Banks and credit unions offer CDs directly with rates that vary by institution and term length, and your deposit is FDIC or NCUA insured up to $250,000.
  • Online banks typically offer higher CD rates than brick-and-mortar banks because they have lower overhead costs.
  • Brokerages can access CDs from multiple issuers and sometimes offer longer terms or better rates, but you pay a commission or accept a lower rate to cover their fee.
  • The FDIC insurance limit applies per bank, so if you want to protect more than $250,000 in CDs, you need to split your money across multiple institutions.
  • Comparing rates across all three types of sellers takes 15 to 30 minutes and can mean hundreds of dollars in additional interest over the CD term.

Banks and credit unions: Direct CDs with FDIC or NCUA protection

A traditional bank or credit union sells you a CD directly. You walk in, call, or log into their website, choose a term and amount, and the institution holds your money. The rate is set by that bank or credit union alone — they do not shop rates for you. Most banks offer terms of three months, six months, one year, two years, three years, and five years, though some offer additional lengths like 18 months or 4.5 years.

Your deposit is protected by the FDIC (Federal Deposit Insurance Corporation) if you use a bank, or the NCUA (National Credit Union Administration) if you use a credit union. Both insure up to $250,000 per depositor, per institution. If you have $300,000 to invest in CDs, you could put $250,000 at one bank and $50,000 at another to stay fully protected. The insurance covers the principal and accrued interest.

The downside of buying directly from a single bank is that you see only their rates. A bank with a large branch network and high operating costs often pays lower CD rates than a bank with fewer branches. If you are loyal to a bank where you already have a checking account, you may not be getting the best rate available in the market.

Online banks: Higher rates with the same FDIC protection

Online banks operate without physical branches, which means lower overhead. They pass some of that savings to customers in the form of higher CD rates. An online bank's one-year CD might pay 5.0% while a traditional bank in your area pays 4.2% for the same term. The FDIC insurance is identical — $250,000 per depositor — and the buying process is the same: you open an account online, fund it, and buy the CD through their website.

The trade-off is that you cannot walk into a branch if you have a question or need to make a change. Most online banks handle everything by phone, email, or chat. If you need to withdraw money before the CD matures, you will pay an early withdrawal penalty, and you will need to contact the bank to process it. For many people, the higher rate makes this inconvenience worth it.

Popular online banks that offer CDs include Marcus by Goldman Sachs, Ally Bank, American Express Personal Savings, and Discover Bank. Rates change daily, so the highest-paying online bank today may not be the highest-paying one next week. Checking a rate comparison site or visiting several online banks' websites takes a few minutes and can show you the current market.

Brokerages: Access to multiple issuers and longer terms

A brokerage like Fidelity, Charles Schwab, or Vanguard can buy CDs on your behalf from multiple banks and credit unions. Instead of choosing one institution's CD, you see a list of available CDs from dozens of issuers, each with its own rate and term. This gives you more options and sometimes access to longer terms — some brokerages offer CDs with 10-year or even 20-year terms that you cannot find at a retail bank.

The catch is that brokerages make money on the transaction. Some charge an upfront commission, usually $25 to $100 per CD. Others do not charge a commission but buy the CD at a slightly lower rate than you would get if you bought directly from the bank, pocketing the difference. Either way, you pay for the convenience of shopping across multiple issuers. For a large CD or a long-term purchase, the commission may be worth it; for a small CD, it may not be.

CDs bought through a brokerage are still FDIC-insured if the issuer is a bank, but the insurance is held in the brokerage's name as custodian. This means your $250,000 limit applies to each bank issuer, not to the brokerage as a whole. If you buy a $200,000 CD from Bank A and a $200,000 CD from Bank B through the same brokerage, both are fully insured because they are issued by different banks. The brokerage is simply the middleman.

How to compare rates across all three types

Start by checking the rates at your current bank or credit union. Write down the one-year, three-year, and five-year rates. Then visit two or three online banks — Marcus, Ally, and Discover are good starting points — and write down their rates for the same terms. Finally, log into a brokerage you already use, or visit a major brokerage's website and look at their CD offerings. Most brokerages show the issuer, the rate, the term, and any fees.

Calculate the total interest you would earn on your amount over the CD term at each rate. A difference of 0.5% on a $10,000 one-year CD is $50. On a $50,000 CD, it is $250. On a $100,000 CD, it is $500. These differences add up, especially over longer terms. A 5.0% rate on a five-year CD pays significantly more than a 4.5% rate on the same term.

Once you have identified the best rate for your term and amount, check whether there are any fees or penalties you need to know about. Most CDs charge an early withdrawal penalty if you take your money out before maturity — this is typically three to six months of interest, but it varies. Some banks waive the penalty if you move to a higher-rate CD with them, so read the fine print.

FDIC insurance limits and how to protect more than $250,000

The FDIC insures up to $250,000 per depositor, per bank. If you have $500,000 to invest in CDs, you cannot put it all at one bank and expect full protection. You need to split it across at least two banks. You could put $250,000 at Bank A and $250,000 at Bank B, and both amounts would be fully insured.

If you use a brokerage to buy CDs from multiple banks, each CD is insured separately based on the issuing bank. A $200,000 CD from Bank A and a $200,000 CD from Bank B, both bought through the same brokerage, are both fully insured. The brokerage does not count toward your limit; the issuing bank does.

Some people use a strategy called "CD laddering" to manage large amounts and insurance limits. You buy multiple CDs with different maturity dates — for example, a one-year, a two-year, and a three-year CD — so that one matures each year. This spreads your money across time and allows you to reinvest at new rates as each CD matures. You can also ladder across multiple institutions to stay within insurance limits while keeping your money working.

What happens after you buy a CD

Once your CD is purchased, your money is locked in until the maturity date. You cannot withdraw it without paying an early withdrawal penalty. The interest accrues and is either paid to you at maturity or compounded and added to your principal, depending on the CD's terms. Most CDs pay interest at maturity, meaning you receive the principal plus all accrued interest in one lump sum.

As the maturity date approaches, the bank or brokerage will contact you to ask what you want to do. You can let the CD renew automatically at the current rate, withdraw the money, or buy a new CD. If you do nothing, most institutions will renew automatically, but the new rate may be lower than what you earned on the previous CD. It is worth checking rates again at maturity and shopping around, just as you did when you first bought the CD.

Frequently Asked Questions

Can I buy a CD with money from a different bank?

Yes. You can transfer money from any bank account to the bank or brokerage where you want to buy the CD. Most transfers take one to three business days. You do not have to buy a CD from the bank where your checking account is held.

What is the difference between a CD bought at a bank and a CD bought through a brokerage?

A bank CD is issued and held by that bank. A brokerage CD is issued by a bank but purchased through a brokerage, which may charge a fee or take a small rate cut. Both are FDIC-insured if the issuer is a bank. Brokerages offer more choices and sometimes longer terms, but banks offer simplicity and direct relationships.

Do I pay taxes on CD interest?

Yes. CD interest is taxable income in the year it is earned or paid, depending on the CD's terms. You will receive a 1099-INT form from the issuer showing the interest you earned. Report this on your tax return. Some people buy CDs in tax-advantaged accounts like IRAs to defer or avoid taxes on the interest.

Can I move a CD from one bank to another before it matures?

You can withdraw the money and pay the early withdrawal penalty, then buy a new CD elsewhere. You cannot transfer the CD itself. If rates have risen significantly, paying the penalty and moving to a higher-rate CD may still come out ahead, but do the math first.

Which type of CD seller is best for me?

If you want simplicity and already bank somewhere, start there. If you want the highest rate and do not mind managing an online account, an online bank is usually the best choice. If you have a large amount to invest or want access to longer terms, a brokerage may be worth the fee or rate cut.