Charles Schwab CD Rates for 2024

Charles Schwab CDs are brokered CDs that boast high APYs and a variety of term lengths. Like other brokered CDs, Charles Schwab CDs come with some major restrictions, but could be a great option for Charles Schwab clients who want to earn fixed interest at a competitive rate. If that sounds good to you, read on to learn more about what Charles Schwab CDs have to offer.

Charles Schwab CD rates for 2024

Charles Schwab offers brokered CDs, which differ from traditional bank CDs. For one, Charles Schwab doesn't issue the CD itself but rather purchases it (along with a bulk of others) from a CD provider, like a bank. Because it's not the CD issuer, Charles Schwab can shop around at many different banks, find the best CD rates, buy them in bulk, then offer them to its clients. Let's take a look at some of the pros and cons of these CDs.

PROS

• Competitive CD rates
• Wide variety of term lengths
• Potential to expand FDIC insurance

Cons

• Charles Schwab brokerage account required
• Lacks long-term CD options
• Money grows by simple interest
• Minimum deposit of $1,000
• Not easy to liquidate

While you can find numerous CD terms from different providers, Charles Schwab CDs can only be purchased in increments of $1,000. This isn't unusual for brokered CDs (most brokers require you to buy them in increments) but could be pesky if you have a fractional amount to invest, say, $2,450.

That said, buying CDs in increments does allow you to purchase them from multiple FDIC-insured banks, which could expand your coverage. For instance, buying two CDs from two separate FDIC-insured banks would give you $500,000 in total insurance.

Unfortunately, Charles Schwab isn't the best broker for CD ladders, as its longest CD term is currently 18 months. This differs from other brokerages, like Fidelity and Edward Jones, which offer CD terms as long as 10 years.

Another caveat to consider: Charles Schwab CDs don't have the luxury of compound interest. In other words, the CD rate will apply to your principal only, not to any interest you've accumulated. This is common for brokered CDs, but differs from bank CDs, which often do calculate interest on a compound model.

Finally, unlike bank CDs, you don't have to pay a penalty if you want to liquidate your CD early. Instead, you could sell it on a secondary market. Selling a brokered CD on a secondary market could take time or force you to sell it for a loss. On the other hand, if your CD's APY is more favorable than ongoing rates, you could sell it for more than its par value.

Other Charles Schwab CD accounts

In addition to its standard CD, Charles Schwab may also offer the following CD accounts:

• Callable CDs: These CDs have a call feature that lets the provider cancel the CD contract before it reaches maturity. The perk of a callable CD is that they typically have higher APYs. The downside is that your bank could choose to redeem the CD at a time when CD rates are dropping.
• Zero-coupon CDs: These CDs don't have an interest rate. Rather, you buy them at a discount and wait until they mature to get your earnings. For instance, you might buy a 3-year CD valued at $6,000 for $5,000.
• Step-up CDs: Step-up CDs will gradually increase your APY over your term. Often, it comes with a schedule of interest rate changes, so you'll know ahead of time when the rate change will happen.

Keep reading about Charles Schwab:

• Schwab Bank High Yield Investor Checking

Our CDs methodology

At The Motley Fool Ascent, certificates of deposit (CDs) are rated on a scale of one to five stars, primarily focusing on annual percentage yield (APY) and early withdrawal penalty fees. Our highest-rated CDs generally include competitive APYs without complex qualification tiers, low withdrawal fees, reliable brand trust and reputation, and ease of use.

See our full Ratings Methodology here.