This article reviews the best Vanguard CD rates in May 2024 and how these rates compare with other brokered CD rates. Vanguard’s brokered certificates of deposit (brokered CDs) can only be bought by Vanguard customers.
Vanguard CD Rates
Vanguard offers brokered CDs, which are bank-issued CDs bought on a brokerage. Vanguard’s brokered CDs can only be accessed by Vanguard customers. Vanguard provides both newly issued CDs from different banks and secondary CDs sold by other investors on the secondary market.
The following table displays the top Vanguard CD rates per maturity term for new issue CDs (both callable and non-callable) in Vanguard’s marketplace*:
APYs shown are as of May 3, 2024. Click to expand on mobile.
*Note: Vanguard brokered CD rates can change. YieldAlley suggests checking Vanguard’s website for the latest information.
Why Should I Consider Buying Brokered CDs on Vanguard?
Considering the current interest rates and the CD rates provided by Vanguard, purchasing brokered CDs on Vanguard is a superior alternative to keeping your cash in a savings account that earns less yield. Vanguard’s current CD rates are all well over 5%.
Vanguard brokered CD rates are very competitive, and can pay higher rates than Vanguard money market funds. This makes them an attractive option for investors looking for higher returns on their cash. Additionally, Vanguard brokered CDs are FDIC-insured up to $250,000 per bank per depositor.
Buying CDs on Vanguard
- Vanguard Account Required: You must have a brokerage account with Vanguard to buy and hold your Vanguard brokered CDs.
- Fee for buying new-issue CDs: None.
- Fee for secondary CDs: Vanguard charges a $1 fee per $1,000 CD, with a $250 maximum. Unlike other brokerages such as Fidelity, Charles Schwab, and E*Trade, Vanguard does not charge a minimum fee for secondary trades.
- Minimum investment per New-Issue CD: $1,000. You can buy additional new-issue CDs in increments of $1,000.
- FDIC Insurance: Yes. Vanguard’s brokered CDs offer FDIC insurance of $250,000 per bank per depositor. For example, you have expanded FDIC coverage if you buy two CDs on Vanguard from two banks up to $500,000.
Vanguard CD Fees and Key Information
Frequency of Interest Payments: It depends. The payment frequency of interest on Vanguard varies depending on the type of CD. Generally, CDs with a maturity period of less than one year only pay interest upon maturity. In the case of 1-year CDs, interest is typically paid upon maturity, but some may also provide interest every six months. However, for CDs with longer maturity periods, such as 18 months or more, interest payments may occur every six months, every three months, or even monthly.
Monthly Fees: None. CDs generally not have monthly fees.
Compounding: None. Unlike bank CDs, brokered certificates of deposit (CDs) do not earn compound interest. Instead, brokered CDs accumulate simple interest.
Early Withdrawal Penalty: None. When it comes to Vanguard brokered CDs, there are no early redemption fees as seen with bank-issued CDs. However, if you choose to trade a brokered CD on the secondary market, there is a possibility of receiving less than the initial purchase price.
Auto-Roll: No. Vanguard does not offer Auto-Roll, so you won’t be able to automatically reinvest your CD on Vanguard when your CD matures.
Vanguard IRA CD: Yes. If you have an IRA account with Vanguard, you can use that IRA to buy brokered CDs.
Types of CDs Offered By Vanguard
New Issue CDs: When a bank or financial institution introduces a new investment opportunity to the public, they offer what is known as a new issue CD. This type of certificate of deposit has a predetermined duration and interest rate, providing investors with a guaranteed return on their investment for a specific period of time. Brokerages like Vanguard facilitate the sale of these new-issue CDs on behalf of banks and financial institutions.
Secondary CDs: On the other hand, secondary CDs are purchased from existing owners on the secondary market. This allows investors to buy or sell a CD before its maturity date, providing flexibility in managing their investments.
Callable CDs: A callable CD grants the issuing bank the option to redeem the CD before its scheduled maturity date. Usually, this option is exercised after a certain period of time or on specific dates when the bank aims to take advantage of lower interest rates.
Non-Callable CDs: In contrast, a non-callable CD cannot be redeemed by the issuer before its maturity date. Once you invest in a non-callable CD, the issuer cannot recall the funds or terminate the CD until the agreed-upon maturity period. This characteristic makes non-callable CDs a more secure and predictable investment choice.
Jumbo CDs: We are unaware of any Vanguard jumbo CD rates being offered. However, if you would like to simulate the effect of buying jumbo CDs on Vanguard, you simply have to purchase a larger amount of CDs. Jumbo CDs typically have a minimum investment of $10,000.
Why is My Vanguard CD Losing Money?
If your CD appears to lose money, it could be due to rising interest rates, and your Vanguard CD rates are now lower than the current interest rate. If you hold your CD until maturity, you will be guaranteed your original principal upon maturity, plus your interest payments.
We recommend ignoring any fluctuation in the CD value if you plan on holding your CD to maturity.
Vanguard Cash Equivalents and Other Offerings
Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value. CDs are generally considered cash equivalent.
Some examples of cash equivalents include the following:
- Money Market Funds: Money market funds allocate investments in high-quality, short-term instruments. Common holdings include Treasury bills and other debt backed by the U.S. government. Vanguard money market funds are known for their low expense ratios.
- Treasury Bills: These financial instruments are short-term securities issued by the U.S. government and typically mature in less than a year.
- Certificates of Deposit (CDs): These are timed deposits held with banks or credit unions, safeguarded by the Federal Deposit Insurance Corporation (FDIC). CDs come with a predetermined, fixed term and generally offer a fixed interest rate.
You can buy all of these cash equivalents with a Vanguard brokerage account.
I’ve Reviewed Vanguard’s CD Rates. Are These CDs a Good Fit for Me?
Ensure that the Vanguard brokered CD rates today align with your financial situation and objectives.
Consider the following:
- Risk Tolerance: CDs, being virtually risk-free and FDIC-insured, offer a secure return rate, albeit lower than riskier assets like stocks or mutual funds. They can also lack the flexibility of products like Treasuries.
- Financial Goals: Identify your short and long-term financial aspirations. CDs serve well for short-term goals or as a stable component in a diverse investment portfolio.
- Interest Rates: Assess the current interest rates. CDs are appealing to those seeking fixed, guaranteed returns.
- Capital Preservation: If your priority is safeguarding your capital over high returns, CDs, due to their low-risk nature, are suitable.
- Income Source: CDs benefit those needing a consistent income source, such as retirees, as they offer regular interest payments.
- Liquidity Needs: Evaluate your fund accessibility needs. CDs require a fixed-term commitment, making them less ideal if you need regular cash access.
- CD Laddering: Consider a CD ladder strategy involving buying a series of CDs with different maturity dates.
CDs offer a secure return during fluctuating interest rates. Other cash equivalents like money market funds and Treasury bills are also worth considering. These products may offer more flexibility and can potentially higher yields than Vanguard brokered CDs.
