Step 1: Getting Started with Your E*TRADE Account
Before you can dive into the world of brokered CDs, you'll need to have an active E*TRADE account.
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Do You Already Have an E*TRADE Account?
If you're already an ETRADE customer*, that's fantastic! Simply log in to your account. You'll primarily be using your brokerage account for purchasing brokered CDs. If you only have a bank account with E*TRADE (Morgan Stanley Private Bank, National Association), you might consider opening a brokerage account to access the wider selection of brokered CDs.
Opening a New E*TRADE Account
If you're new to ETRADE*, don't worry, the process is straightforward.
Visit the E*TRADE Website: Go to
us.etrade.com.Select "Open an Account": You'll typically find this prominent button on the homepage.
Choose Your Account Type: For purchasing brokered CDs, you'll want to open a brokerage account. You can open an individual account, joint account, or even an IRA (Individual Retirement Account) if you plan to hold your CDs within a tax-advantaged retirement vehicle.
Complete the Online Application: This will require personal information such as your name, address, Social Security number, employment details, and financial information. Be prepared to provide identification if requested.
Review and Submit: Carefully review all the information you've entered before submitting your application. Accuracy is key to avoid delays.
Step 2: Funding Your E*TRADE Account
Once your E*TRADE account is open (or if you already have one), you'll need to ensure you have sufficient funds to purchase your desired CD.
Linking External Accounts
Electronic Funds Transfer (ACH): This is often the easiest and most common way to transfer money from an external bank account to your ETRADE brokerage account. You'll link your bank account by providing your bank's routing number and your account number. ETRADE typically allows you to set up recurring transfers or one-time transfers. Transfers via ACH usually take 1-3 business days to settle.
Wire Transfer: For larger amounts or if you need funds to be available quickly, a wire transfer is an option. While faster, there might be fees associated with wire transfers from your originating bank.
Check Deposit: You can deposit a check by mailing it to ETRADE or, for convenience, use the ETRADE Mobile app's mobile check deposit feature. Be aware of daily limits for mobile deposits.
Transfer an Account: If you have an existing brokerage account at another financial institution, you can transfer those assets directly to your ETRADE account*. This can be a seamless way to consolidate your investments.
Confirming Funds Availability
Before placing a CD order, always confirm that your funds have settled and are available for trading in your E*TRADE brokerage account. Unsettled funds cannot be used for purchases.
Step 3: Navigating to the CD Offerings on E*TRADE
QuickTip: Reflect before moving to the next part.
With your account funded, you're ready to explore the CD market.
The Bond Resource Center
E*TRADE centralizes its fixed-income offerings, including CDs, within its Bond Resource Center.
Log In: Access your E*TRADE account.
Navigate to "Investments" or "Trading": Look for a menu option that leads to investment choices or trading platforms.
Find "Bonds & CDs": Within the investment options, you should see a section dedicated to Bonds and CDs. Click on this.
Access the Bond Resource Center: This will take you to a dedicated portal where you can search and research various fixed-income products.
Searching for Certificates of Deposit
Within the Bond Resource Center, you'll find various filters and search tools.
Specify "CDs": Ensure you filter for "Certificates of Deposit" or "Brokered CDs" to narrow your search.
New Issues vs. Secondary Market: ETRADE offers both newly issued CDs and CDs available on the secondary market. New issues are typically purchased directly from the issuer at par, while secondary market CDs are those being sold by other investors and can trade at a premium or discount, similar to bonds. New issue brokered CDs are generally commission-free on ETRADE, while secondary market offerings may have a small commission per bond.
Step 4: Researching and Selecting Your CD
This is where you'll evaluate the available CD options to find the best fit for your financial goals.
Understanding CD Terms and Rates
Term Length: CDs come in a wide range of maturities, from a few months to several years (e.g., 3-month, 6-month, 1-year, 2-year, 5-year). Generally, longer terms tend to offer higher interest rates, but they also tie up your money for a longer period.
Annual Percentage Yield (APY): This is the most crucial figure to compare. The APY reflects the total annual return on your investment, taking into account compounding interest.
Issuing Bank: ETRADE provides CDs from hundreds of different banks. While the CD itself is held through ETRADE, the underlying issuer is the bank.
Important Considerations
FDIC Insurance: Brokered CDs purchased through ETRADE are FDIC-insured up to $250,000 per depositor, per insured bank, for each ownership category. This means your principal and accrued interest are protected up to this limit in case the issuing bank fails. If you buy CDs from multiple banks through ETRADE, each is separately insured.
Callable CDs: Be extremely mindful of callable CDs. A callable CD gives the issuing bank the option to "call" or redeem the CD before its maturity date. This usually happens if interest rates fall significantly, allowing the bank to refinance at a lower rate. If your CD is called, you'll receive your principal and accrued interest, but you'll then need to reinvest at potentially lower prevailing rates. ETRADE's platform will clearly indicate if a CD is callable.*
Interest Payment Frequency: CDs can pay interest monthly, quarterly, semi-annually, or at maturity. Consider your income needs when choosing.
Minimum Investment: Note the minimum investment requirement for each CD.
Using Filters and Sorting
E*TRADE's Bond Resource Center allows you to:
Tip: Take mental snapshots of important details.
Filter by Maturity: Find CDs that match your desired time horizon.
Sort by Yield: Easily identify the CDs offering the highest APY.
Filter by Callable/Non-Callable: A critical filter to ensure you understand the terms. Many investors prefer non-callable CDs for guaranteed income.
Search by Issuer: If you have a preference for a particular bank.
Tip: Consider a CD laddering strategy. This involves purchasing multiple CDs with staggered maturity dates. For example, you might buy a 1-year, 2-year, and 3-year CD. As each short-term CD matures, you can reinvest the principal into a new long-term CD (e.g., another 3-year CD). This provides regular access to some of your funds while still benefiting from higher long-term rates.
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Step 5: Placing Your CD Order
Once you've identified the CD (or CDs) you want to purchase, it's time to place the order.
Reviewing the Order Details
Select the CD: Click on the CD you wish to buy from the search results.
Enter Quantity/Amount: Specify the dollar amount you want to invest. This will correspond to a certain number of CD "bonds" (each typically $1,000 face value).
Review Order Ticket: A summary or order ticket will appear. Double-check all details, including the issuing bank, interest rate, maturity date, total principal amount, and whether it's callable.
Confirm Pricing: For new issues, you'll typically pay at par. For secondary market CDs, the price might be slightly above or below par, affecting your effective yield if held to maturity. E*TRADE will display the net price.
Place Order: Once you've verified everything, confirm and place your order.
Confirmation
You will receive an order confirmation once your purchase is successfully placed. Keep this for your records. The CD will typically appear in your E*TRADE portfolio shortly after.
Step 6: Managing Your CD Investment
After purchasing, your CD will become part of your E*TRADE portfolio.
Monitoring Your Portfolio
Access Your Portfolio: You can view your CD holdings, including the principal amount, maturity date, and accrued interest, within your E*TRADE portfolio summary.
Statements: E*TRADE will provide statements detailing your account activity, including interest payments.
What Happens at Maturity?
When your CD reaches its maturity date, you typically have a few options:
QuickTip: Reread for hidden meaning.
Automatic Rollover: Many CDs will automatically roll over into a new CD of the same term at the prevailing interest rate unless you instruct otherwise during a grace period.
Withdraw Funds: You can choose to withdraw your principal and accrued interest and transfer it to another account (e.g., your E*TRADE checking or savings account, or an external bank account).
Reinvest in a New CD: You can use the matured funds to purchase a different CD with a new term or from a different issuer.
ETRADE will usually notify you as a CD approaches its maturity date, providing you with time to make your decision during the grace period (often around 7 calendar days).*
By following these steps, you can confidently purchase Certificates of Deposit on E*TRADE, diversifying your portfolio with a relatively low-risk, income-generating investment.
Frequently Asked Questions (FAQs) About Buying CDs on E*TRADE
Here are 10 common questions with quick answers to further assist you:
How to Check E*TRADE CD Rates?
You can check E*TRADE CD rates by logging into your account, navigating to the "Bonds & CDs" section within "Investments" or "Trading," and then filtering for Certificates of Deposit. The Bond Resource Center will display current yields for available terms.
How to Differentiate Between Bank CDs and Brokered CDs on E*TRADE?
ETRADE primarily offers brokered CDs. These are CDs issued by various banks but bought and held through your ETRADE brokerage account, allowing for potential secondary market trading and a wider selection compared to direct bank purchases.
How to Determine if an E*TRADE CD is Callable?
When viewing a specific CD's details on the E*TRADE platform, there will be a clear indication if the CD is "callable." It's crucial to check this, as callable CDs carry the risk of early redemption by the issuer.
How to Fund My E*TRADE Account for a CD Purchase?
You can fund your E*TRADE account via Electronic Funds Transfer (ACH), wire transfer, mailing a check, or using the mobile check deposit feature. Ensure funds are settled before attempting a purchase.
Tip: Reread complex ideas to fully understand them.
How to Sell a Brokered CD Before Maturity on E*TRADE?
Unlike traditional bank CDs with early withdrawal penalties, brokered CDs on E*TRADE can generally be sold on the secondary market before maturity. However, the sale price will depend on current market interest rates, and you could receive more or less than your original principal.
How to Maximize FDIC Insurance with E*TRADE CDs?
To maximize FDIC insurance, you can purchase CDs from multiple different issuing banks through E*TRADE. Each bank's CD is independently insured up to $250,000 per depositor, per ownership category.
How to Set Up a CD Ladder on E*TRADE?
To set up a CD ladder, you would purchase multiple CDs with staggered maturity dates (e.g., 6-month, 1-year, 2-year). As each shorter-term CD matures, you reinvest the proceeds into a new long-term CD to maintain the ladder structure.
How to Receive Interest Payments from My E*TRADE CD?
The interest payment frequency (monthly, quarterly, semi-annually, or at maturity) is determined by the specific CD. E*TRADE will credit the interest directly to your linked cash account or reinvest it into the CD, depending on the CD's terms and your preference.
How to Find New Issue CDs on E*TRADE?
Within the Bond Resource Center, when searching for CDs, look for options to filter by "New Issues" or similar terminology. These are CDs being offered directly from the issuing banks for the first time.
How to Contact E*TRADE for CD-Related Questions?
If you have further questions or need assistance, you can contact E*TRADE customer service via phone (typically 800-387-2331) or through their secure messaging system after logging into your account.
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