Edward Jones's CDs are brokered CD accounts, meaning Edward Jones isn't the original CD provider, but buys them in bulk from banks and other financial institutions and makes them available for its investors. Acquiring CDs in this manner helps Edward Jones repackage them with higher APYs and a greater variety of terms than what the banks are offering directly.
Let's take a closer look at some of the Edward Jones CD pros and cons.
PROS
- Competitively high APYs
- Wide variety of terms
- Potential to extend FDIC insurance
- Interest can be deposited as you earn it
CONS
- Edward Jones brokerage account required
- No compound interest
- Selling CD on secondary market could result in loss
- Commission charge on secondary CDs
- Minimum deposit of $1,000
Brokered CDs are a bit more complex than traditional CD products issued by banks and credit unions. Yes, the CD rates are higher, but the interest rate is calculated on a simple basis, not compound. In other words, you'll only earn interest on your initial deposit, but not any interest you've already earned. This is different from bank CDs, which often have compound interest rates and will apply your APY to your principal and any interest you've accumulated.
That said, interest that you earn on a long-term CD (CDs with terms above 12 months) will be deposited into an Edward Jones brokerage or money market account as you earn it (monthly, quarterly, semiannually, or annually). You can then reinvest this money in CDs or savings products to keep your overall APY high.
Most bank CDs let you withdraw money early if you pay a penalty, often three months or more of accrued interest. But brokered CDs are different. Once you lock money into your Edward Jones CD, you can't break your term. The only way to access money early is to sell it on a secondary market. Depending on your CD's terms, this could result in a loss (or a gain).
For instance, if your CD's APY is significantly lower than the ongoing rate (say, 3.00% versus 5.50%), you might have to sell if below its value to attract buyers at all.
Keep in mind Edward Jones may charge up to 2% of the dollar amount you buy or up to 0.75% of any CD you sell on secondary markets.
Who is an Edward Jones CD right for?
The right person for this CD is an investor who has an Edward Jones brokerage account. This CD could also be right for you if you're certain a CD is the best place for your savings and you're prepared to lock your money up for the length of your term.
Bottom line: Edward Jones CD rates
