This can give yourself increased access to potential liquidity as you earn interest income. Some people buy CDs directly from their bank. Many larger brokerage firms also allow customers to buy CDs in their brokerage and retirement accounts, such a Roth IRA or Rollover IRA. CDs bought through a brokerage firm are known as "brokered CDs. " A customer could hold a variety of brokered CDs from different institutions within a single account. Why Banks Issue Certificates of Deposit When you buy a CD, the bank turns around and distributes those funds as loans to borrowers. The bank charges higher interest rates than your CD, so it can repay the CD (plus interest) and still have some profit left over to pocket for itself. This allows the banks to take on the risk of lending, keeping your money safe. You don't have to worry about monitoring the credit risk of potential borrowers. The owners of the bank do take on risk, and they generate a profit for it, which allows them to pay employees, open new branches, and distribute cash to stockholders as a dividend.
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