A Comprehensive Review of Charles Schwab CD Rates

A Comprehensive Review of Charles Schwab CD Rates: What You Need to Know Before Investing

When it comes to certificates of deposit (CDs), Charles Schwab is a well-known name. With all its financial services, Schwab has CDs for both conservative and aggressive investors. Here’s a full review of Charles Schwab CD rates versus others, and the pros and cons.

What are Certificates of Deposit (CDs)?

First, what are CDs? A CD is a time deposit account with a fixed rate for a set term. You get higher interest rates than a regular savings account, and in return, you leave your money alone for a certain period. Terms are from a few months to several years, and early withdrawal has a penalty.

Charles Schwab CD Rates

Charles Schwab has two kinds of CDs: brokered CDs and Schwab Bank CDs. Brokered CDs are sold through Schwab’s brokerage service and include CDs from other banks. Schwab Bank CDs are issued by Charles Schwab Bank. Rates, terms, and features differ.

Brokered CDs

Brokered CDs are for investors who want rates and flexibility. Buy through a brokerage account and sell on the secondary market—something you can’t do with a traditional CD.

Rates

Rates for brokered CDs at Schwab are competitive vs. bank CDs. Rates change with market conditions and the banks that issue them, but as of mid-2024, they’re between 0.50% and 5.00% depending on term and bank.

Terms and Liquidity

Brokered CDs at Schwab are from 3 months to 10 years. That’s flexibility to fit your financial goals and timeline, and the ability to sell on the secondary market, which you can’t do with a traditional CD.

Schwab Bank CDs

Schwab Bank CDs are direct from Charles Schwab Bank and are like traditional bank CDs in structure and liquidity.

Rates

Rates for Schwab Bank CDs are lower than brokered CDs but higher than savings accounts. As of mid-2024, 0.30% to 4.00%.

Terms and Features

Schwab Bank CDs are available in terms from 3 months to 5 years. Unlike brokered CDs, these CDs are not liquid and cannot be sold on the secondary market. But they are a safe and certain investment with FDIC insurance up to the applicable limits.

Charles Schwab CD Rates vs. Others

When you look at CD rates, you should look elsewhere too. Here’s how Schwab compares.

Ally Bank

Ally Bank is big on high-yield savings and CD rates. As of mid-2024, Ally’s rates are 0.50% to 4.75%, similar to Schwab’s. But Ally has a no-penalty CD, which allows early withdrawals with no penalty. Schwab doesn’t.

Capital One

Capital One’s rates are competitive with Schwab’s and often higher. As of mid-2024, Capital One’s rates are 0.40% to 4.80%. Online account access and application, just like Schwab.

Discover Bank

Discover Bank’s rates are competitive, 0.40% to 4.85% as of mid-2024. Terms and no fees. That’s more than Schwab.

Why Invest in Charles Schwab CDs

Investing in Schwab CDs has these benefits:

Rates

Brokered and Schwab Bank CDs. Higher than savings.

Flexibility and Liquidity

Brokered CDs offer flexibility in terms of investment duration and liquidity. You can sell brokered CDs on the secondary market if you need access to your funds before the maturity date.

Convenience

Charles Schwab has a simple online platform to manage your CD investments. You can browse available CDs, compare rates and buy through your brokerage account.

FDIC Insurance

Both brokered and Schwab Bank CDs are FDIC insured up to the applicable limits.

Downsides

While Charles Schwab CDs have many advantages, there are also:

Early Withdrawal Penalties

Like most CDs, early withdrawal from Schwab CDs has penalties. So if you need access to your funds before the maturity date, the overall return may be lower.

Lower rates for Schwab Bank CDs

Schwab Bank CDs have lower rates than brokered CDs. Not as good if you want the highest possible return.

Brokered CDs complexity

If you’re new to investing, brokered CDs and the secondary market can be confusing. You need some financial know-how to buy and sell brokered CDs

Are Charles Schwab CDs Right for You?

Deciding to invest in Charles Schwab CDs depends on your goals, risk tolerance and need for liquidity. Here are a few scenarios where Schwab CDs might work for you:

Conservative Investors

If you want to preserve capital and get a guaranteed return, Schwab CDs are an option. Fixed rates and FDIC insurance make it a safe investment.

Diversification

If you want to diversify your portfolio, adding Schwab CDs can add stability and reduce overall risk. The terms available allow you to create a CD ladder and get more liquidity and yield.

Flexibility and Liquidity

If you need to get to your money but want to get higher rates, brokered CDs offer more liquidity than traditional CDs. This is great for those who think they may need to tap into their funds before the CD matures.

Conclusion

Schwab has CDs for all types of investors. With competitive rates, flexible terms and FDIC insurance, a Schwab CD can be a great addition to your portfolio. But you need to compare to others and your situation and goals before you invest. Then you’ll know you’re being smart with your money.

In this wild financial world, keeping up with current CD rates and features is everything. Schwab is right for many people but, as with any investment, research and thought are required. Whether you’re a seasoned pro or new to CDs, know Schwab’s stuff so you get the most and reach your goals.