A Comprehensive Guide to Charles Schwab’s Certificate of Deposit Rates for July 2024
Certificates of deposit (CDs) have become more appealing as interest rates have increased. These investments are secure, have a set term, and are insured by the FDIC up to certain limits. Charles Schwab is offering competitive CD rates for July 2024. Here’s what you need to know.
### Charles Schwab CD Rates for July 2024
Charles Schwab provides CD accounts with terms ranging from three months to two years, and sometimes longer. Here are the rates for select terms:
– **3-month CD**: 5.41% APY
– **6-month CD**: 5.32% APY
– **9-month CD**: 5.18% APY
– **1-year CD**: 5.35% APY
– **18-month CD**: 5.25% APY
– **2-year CD**: 5.15% APY
### Important Information
CDs from Charles Schwab are available through Schwab CD OneSource and are issued by Charles Schwab & Co., Inc. These are brokered CDs, but since they are offered by FDIC-insured banks, they are also FDIC insured. Unlike traditional bank CDs, you won’t incur a penalty for early withdrawal.
### Comparing Charles Schwab CDs
If you’re only familiar with bank CDs, you might find brokered CDs from Schwab quite different.
#### No Early Withdrawal Penalty
One key difference is that Schwab brokered CDs don’t have early-withdrawal penalties. With a standard bank CD, you’d pay a penalty for early withdrawal. However, brokered CDs are traded on the open market, so Schwab will attempt to sell your CD if you need to withdraw funds early. There’s no guarantee it will sell, and if it does, it might be for less than you paid, plus you’ll pay a trade fee. This could be an acceptable risk in urgent situations.
#### Higher Yields
Brokered CDs can come from various banks, unlike a single bank for traditional CDs. This flexibility is one reason Schwab’s rates are more than double the national average. Additionally, these high yields include rates for both non-callable and callable CDs.
A non-callable CD is standard, where you keep your money in the CD until maturity, and the institution pays interest until then. A callable CD allows the institution to close the CD before it matures, returning your initial deposit and any interest earned up to that point. If you reinvest in another CD, the new rate might be lower than the original.
Call options let financial institutions offer higher rates because there’s less risk of losing money when rates decline. The downside is if Schwab calls your CD when rates are dropping, you’ll earn the higher rate for a shorter period than planned. If you reinvest, it will be at a lower rate.
Your order entry screen will indicate if a CD is callable and how long before it can be called. This information is also in a supplement to your CD disclosure statement. Schwab notes that a callable CD is most likely to be called when prevailing rates are lower than the CD rate.
### Minimum Investment
Since Schwab CDs are investments, not savings accounts, they have higher minimum deposits. You need at least $1,000 to buy a CD, and you can increase your investment in $1,000 increments.
### Pro Tip: Create a CD Ladder
If you’re worried about rates or liquidity, consider creating a CD ladder. This involves buying several CDs with different terms and rolling them into longer-term accounts as they mature.
For example, if you have $100,000 to invest, instead of putting it all in a 5-year CD, you could buy five CDs for $20,000 each with terms of 12 months, 2 years, 3 years, 4 years, and 5 years. As each CD matures, you roll it over into a 5-year CD. This way, you benefit from the higher interest rate of a 5-year CD while having one CD mature each year.