Are you looking to add stability and predictable income to your investment portfolio? Certificates of Deposit (CDs) can be an excellent choice, and Merrill Edge offers a streamlined way to access a wide variety of them. This comprehensive guide will walk you through every step of buying CDs on Merrill Edge, ensuring you feel confident and informed throughout the process.
How to Buy CDs on Merrill Edge: Your Comprehensive Guide
Investing in CDs through a brokerage like Merrill Edge offers some distinct advantages over traditional bank CDs, such as a wider selection of issuers and potentially more competitive rates (these are known as brokered CDs). Let's dive in!
Step 1: Are You Ready to Invest in CDs with Merrill Edge?
Before we even log in, let's make sure you're set up for success!
Do you have a Merrill Edge brokerage account? This is the foundational requirement. If you don't have one, you'll need to open one first. This typically involves providing personal information, employment details, and linking a funding source (like a bank account). Merrill Edge offers various account types, including self-directed brokerage accounts, which are ideal for purchasing brokered CDs.
Have you considered your financial goals? CDs are generally best for short-to-medium term savings where capital preservation and predictable income are key. Are you saving for a down payment, a child's education, or simply looking for a stable place to park cash for a set period? Your goals will influence the term of the CD you choose.
Understand the difference between brokered CDs and bank CDs. While both offer FDIC insurance, brokered CDs are purchased through a brokerage firm (like Merrill Edge) and can offer a wider selection from various banks. They also have a secondary market, meaning you may be able to sell them before maturity, though the price can fluctuate based on market interest rates. Traditional bank CDs, on the other hand, typically have early withdrawal penalties if you need your money before the maturity date.
Engage with me right now! Think about your current savings goals. What are you hoping to achieve by investing in CDs? Jot it down, even if it's just a quick thought. This will help you focus as we go through the next steps!
Step 2: Funding Your Merrill Edge Account
Before you can buy any investment, including CDs, your Merrill Edge account needs to be funded.
Sub-heading: Linking Your Bank Account
If you haven't already, you'll need to link your external bank account to your Merrill Edge brokerage account. This is usually done through ACH (Automated Clearing House) transfers. You'll typically provide your bank's routing number and your account number. Merrill Edge may perform small "trial deposits" to verify your bank account, which you'll need to confirm.
Sub-heading: Transferring Funds
Once your bank account is linked, you can initiate a transfer.
Online Transfer: The easiest method is usually an online transfer from your linked bank account directly to your Merrill Edge brokerage account.
Wire Transfer: For larger amounts or faster processing, you might consider a wire transfer. Be aware that wire transfers often incur fees from your bank.
Check Deposit: You can also deposit funds via check, though this generally takes longer to clear. Merrill Edge also supports mobile check deposit for eligible accounts.
Remember: Funds need to be settled in your account before you can use them to purchase CDs.
Step 3: Navigating to the Fixed Income Screener
Merrill Edge provides powerful tools to help you find the right CDs for your needs.
Sub-heading: Logging In
Go to the Merrill Edge website and log in to your account using your User ID and Password.
Sub-heading: Accessing the Research Tab
Once logged in, look for the "Research" tab in the main navigation. Click on it.
Within the "Research" section, you'll typically find a category for "Fixed Income" or "Bonds & CDs." Click on this to access the fixed income screener.
Alternatively, some users may find a direct path to fixed income under the "Trade" tab as well. If you already know the CUSIP number or issuer of a specific CD, you can often go directly to the "Trade" tab and select "Fixed Income" to enter that information.
Step 4: Using the CD Screener to Find Your Ideal CD
This is where you'll define your preferences and filter through the available CDs.
Sub-heading: Setting Your Search Parameters
The CD screener will present you with various criteria to narrow down your search. Here are some common and important parameters:
Term/Maturity Date: This is how long your money will be locked up. You can choose from a few months to several years (e.g., 3 months, 6 months, 1 year, 2 years, 5 years). Consider your liquidity needs when selecting a term.
Yield/Interest Rate: This is the return you'll earn. Look for Annual Percentage Yield (APY). Higher yields are generally more desirable, but they often come with longer terms or from lesser-known issuers.
Issuer: You can filter by the issuing bank. Merrill Edge offers CDs from a variety of banks, including Bank of America, N.A., and many others.
Minimum Investment: Brokered CDs typically have minimum purchase amounts, often starting at $1,000.
Callable vs. Non-Callable:
Non-Callable CDs are straightforward: your principal and interest are returned at maturity.
Callable CDs give the issuer (the bank) the right to "call" or redeem your CD before its maturity date. If interest rates fall, the bank might call your CD, meaning you'd get your principal back sooner than expected and would need to reinvest at a lower rate. Callable CDs often offer slightly higher yields to compensate for this call risk.
FDIC Insured: Always ensure the CDs you are considering are FDIC insured. This protects your principal up to $250,000 per depositor, per insuring bank, for each account ownership category. Merrill Edge primarily offers FDIC-insured brokered CDs.
Coupon Frequency: How often will interest be paid out? (e.g., monthly, quarterly, semi-annually, at maturity).
Sub-heading: Reviewing Search Results
Once you apply your filters, a list of available CDs will appear. Carefully review the details of each CD, including the issuer, maturity date, interest rate/yield, and any special features (like callable provisions).
Pro Tip: Don't just look at the highest yield! Consider the reputation of the issuing bank, the call provisions, and how the maturity date aligns with your financial timeline.
Step 5: Placing Your CD Order
Once you've identified the CD(s) you want to purchase, it's time to place the order.
Sub-heading: Selecting the CD and Entering Quantity
Click on the specific CD you wish to buy.
You'll typically enter the quantity of CDs you want to purchase. Remember that CDs are usually bought in increments (e.g., 1 CD = $1,000 face value).
Sub-heading: Reviewing Order Details
Before confirming, a summary of your order will be displayed. Double-check all the details: the CD issuer, maturity date, interest rate, total principal amount, and any applicable fees. While Merrill Edge generally doesn't charge commissions for online CD purchases, always review the order confirmation for any disclosed charges.
Sub-heading: Confirming Your Order
If everything looks correct and you agree with the terms, proceed to confirm your order. You may need to acknowledge certain disclosures, especially concerning brokered CDs and their secondary market liquidity.
Step 6: What Happens After You Buy a CD
Your work isn't quite done after hitting "confirm."
Sub-heading: Order Confirmation and Settlement
You will receive an electronic confirmation of your order.
CDs typically settle within a few business days. This is when the funds are officially transferred, and you begin accruing interest. You can usually monitor the status of your order in your Merrill Edge account.
Sub-heading: Monitoring Your CD
You can view your CD holdings within your Merrill Edge portfolio. This will show you the face value, interest rate, and maturity date.
Merrill Edge will send you a maturity notice before your CD matures, giving you options for what to do with the funds (reinvest, withdraw, etc.). Unlike traditional bank CDs, brokered CDs generally do not auto-renew. You will need to actively decide what to do when it matures.
Step 7: Considering CD Laddering (Optional, but Recommended)
For enhanced flexibility and potentially higher returns, consider a CD ladder.
Sub-heading: What is a CD Ladder?
A CD ladder involves purchasing multiple CDs with staggered maturity dates. For example, if you have $10,000 to invest, you might buy:
$2,000 in a 1-year CD
$2,000 in a 2-year CD
$2,000 in a 3-year CD
$2,000 in a 4-year CD
$2,000 in a 5-year CD
Sub-heading: Benefits of CD Laddering
Increased Liquidity: You have a portion of your funds maturing at regular intervals, providing access to cash without early withdrawal penalties.
Interest Rate Risk Management: If interest rates rise, you can reinvest the maturing CD at the new, higher rate. If rates fall, you still have some of your money locked in at older, higher rates.
Potential for Higher Overall Yield: You can often capture the higher rates typically offered by longer-term CDs while still having periodic access to funds.
Sub-heading: Building Your Ladder on Merrill Edge
To build a ladder, simply repeat the purchase process (Steps 3-5) for each "rung" of your ladder, selecting different maturity dates. As each CD matures, you can then decide whether to reinvest it into a new, longer-term CD (to maintain the ladder) or use the funds.
10 Related FAQ Questions
Here are some quick answers to common questions about buying CDs on Merrill Edge:
How to Check CD Rates on Merrill Edge?
You can check CD rates by logging into your Merrill Edge account, navigating to the "Research" tab, and then selecting "Fixed Income" to use the CD screener. This will show you current offerings and their respective yields.
How to Sell a Brokered CD on Merrill Edge Before Maturity?
Brokered CDs may be sold on the secondary market through your Merrill Edge account. Go to the "Trade" tab, select "Fixed Income," and look for the option to sell. Be aware that the market value of your CD can fluctuate, and you may receive more or less than your original principal if you sell before maturity.
How to Understand FDIC Insurance for Brokered CDs on Merrill Edge?
Brokered CDs purchased through Merrill Edge are FDIC-insured up to $250,000 per depositor, per insuring bank, for each account ownership category. Merrill Edge works with various banks, allowing you to potentially spread your investments across multiple banks to maximize FDIC coverage.
How to Handle CD Maturity on Merrill Edge?
Merrill Edge will send you a notification prior to your CD's maturity. Unlike some bank CDs, brokered CDs generally do not auto-renew. You will need to log in to your account and choose how you want to handle the matured funds – whether to reinvest them in a new CD, transfer them to your cash management account, or withdraw them.
How to Find Callable vs. Non-Callable CDs on Merrill Edge?
The CD screener within the "Fixed Income" section on Merrill Edge typically allows you to filter for callable or non-callable CDs. Always check the specific details of any CD before purchasing to understand its call provisions.
How to Open a Merrill Edge Account to Buy CDs?
To open a Merrill Edge account, visit their official website and look for the "Open an Account" option. You'll need to provide personal information, financial details, and select the type of brokerage account you wish to open (e.g., Self-Directed).
How to Determine the Minimum Investment for CDs on Merrill Edge?
Brokered CDs on Merrill Edge generally have a minimum investment of $1,000 per CD. However, this can vary by issuer and specific CD offering, so always check the details in the screener.
How to Contact Merrill Edge Customer Service for CD Inquiries?
For assistance with CD purchases or any account-related questions, you can contact Merrill Edge customer service. Their contact information, including phone numbers for self-directed clients, can typically be found on the "Contact Us" or "Help & Support" section of their website.
How to Calculate Potential CD Earnings on Merrill Edge?
Merrill Edge's CD screener will display the Annual Percentage Yield (APY) for available CDs. To estimate your earnings, multiply your principal investment by the APY. For example, a $10,000 CD with a 4% APY would earn approximately $400 in interest over one year.
How to Differentiate Between Merrill Edge CD Offerings and Bank of America CDs?
Merrill Edge offers brokered CDs from various banks, including Bank of America, N.A. While Bank of America also offers its own direct CDs, the brokered CDs on Merrill Edge provide a broader selection and often more competitive rates due to the competitive nature of the brokerage market.
