Who Can Issue Certificates of Deposit?

In the world of personal finance, there are some products that are highly specialized, tailored to an individual's needs and available only through certain types of financial institutions. Certificates of deposit, or CDs, are not one of those products. You can buy a CD just about anywhere financial products are sold, but there are some key differences you'll want to ensure you understand.

What Is a Certificate of Deposit?

A certificate of deposit (CD) is a financial product that locks in your money for a certain period of time in return for a higher interest rate than you could get for a regular savings or checking account. Over the course of its term, whether that's just a couple of months or up to 10 years or more, the CD will accrue interest, either at a fixed or variable rate. You'll receive your original investment back, along with the interest, when the CD reaches maturity. At that point, you can take out the cash or use it to buy another CD.

Where to Buy Certificates of Deposit

Certificates of deposit are widely available at banks and other financial institutions, both online and off.

Commercial banks and credit unions

Given the relatively simple nature of certificates of deposit, it's no wonder that most banks offer at least one or more varieties of them to their customers. For example, Investopedia's regularly updated Best Bank CD Rates listings track close to 200 brick-and-mortar banks, the Internet divisions of traditional banks, and online-only banks that sell CDs.

CDs come in a variety of forms, and not all banks or credit unions may offer every type. CDs can vary by term (from months to years), interest rates, and minimum deposit requirements. They may also have different early-withdrawal penalties should you need to take your money out before the term ends. For those reasons, it makes sense to shop around and not simply assume that your regular bank or credit union offers the best deal.

Though their offerings will vary, a major benefit of going with a bank or credit union's CD offerings is the insurance protection they typically provide, from either the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). If your bank or credit union is federally insured by one of those agencies, your total deposits at that institution (including your CDs and other accounts) will be insured for up to $250,000. Technically, that $250,000 maximum is per depositor, per financial institution, and per ownership category, so if you have more than $250,000 you want to keep in the bank, you can structure your accounts in a way that will multiply your insurance coverage. For example, you could open both individual and joint accounts.

Brokerage firms and independent sales representatives

In addition to banks and credit unions, you can also buy CDs through many brokerage firms and independent sales representatives, commonly referred to as "deposit brokers." They typically negotiate a higher interest rate with a bank in return for bringing in customers. That way, they are able to offer brokered CDs with attractive interest rates. These products are sometimes advertised as high-yield CDs.

Though traditional CDs typically mature in 10 years or less, brokered CDs can come with significantly longer terms, with some reaching 30 years. That doesn't mean, however, that your money will necessarily stay locked away for that long. Because brokered CDs are often sold on the secondary market, you can try to sell your CD to another investor. You will probably have to pay a sales fee, and you may lose money if interest rates on new CDs have risen since you bought them.

Brokered CDs may or may not be covered by FDIC or NCUA insurance. That makes it all the more important that you buy a brokered CD only from a reputable firm.

The Bottom Line

Certificates of deposit are available from many sources, including most banks and credit unions. Higher-yielding CDs are also available through brokerage firms, but they may not provide the safety net of Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA) insurance.