I have always bought CD's direct from the banks. (old fashioned).
I now have a trust account at both Vanguard and Schwab.
Question:
If I purchase "new issue" CD's through the brokerage, are they FDIC insured as if purchased from the bank?
Reason for not getting direct is that some institutions do not allow trust accounts. With a trust account I am able to get $250k per beneficiary of FDIC coverage so then I can go a lot greater than $250k.
Thanks everyone for your help.
Is a brokerage new issue CD FDIC insured?
Re: Is a brokerage new issue CD FDIC insured?
From Vanguard's website:
Brokered CDs versus bank CDs
There are two different types of CDs: "brokered CDs" and "bank CDs." Vanguard offers "brokered CDs," while banks offer "bank CDs." A brokered CD is a type of CD issued by a bank or thrift institution to be bought in bulk by a brokerage firm and resold to brokerage customers. Here are the differences between a brokered and bank CD.
Bank CDs:
Can only be held by the issuing bank.
Do not have CUSIP numbers.
Interest is compounded.
Interest penalties if redeemed prior to maturity.
May "roll over" into another CD at maturity.
FDIC-insured.
Stable market value.
Brokered CDs:
Offered by banks and sold through brokerage firms.
Have CUSIP numbers.
Similar to bonds.
Simple interest paid directly to Vanguard money market fund.
Traded in a secondary market.
Receive all accrued interest if sold prior to maturity.
Can be sold prior to maturity in the secondary market.
Does not "roll over" into another CD at maturity.
FDIC insured.
Fluctuating market value.
Re: Is a brokerage new issue CD FDIC insured?
CDs are FDIC insured. It doesn't matter whether they are new issue or not. Note that insurance only pays to par, so if you buy a $1000 CD for $1100 and the bank fails, then you only get $1000.
Brokered CDs can be new issue or secondary, both are FDIC insured. It says so before you buy them and when you buy them, so there should be no doubt.
Brokered CDs can be new issue or secondary, both are FDIC insured. It says so before you buy them and when you buy them, so there should be no doubt.
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Re: Is a brokerage new issue CD FDIC insured?
thanks everyone for your help.