Callable CD Checklist
Investors often turn to federally insured certificates of deposit, sold by banks or brokers, when stock
markets are volatile. Rising interest rates and stock market drops have made CDs more attractive,
especially to older investors. But what many investors don’t realize – and some stockbrokers apparently
aren’t adequately disclosing – is that, unlike traditional CDs, with “callable” CDs only the issuer, and not
the investor, can redeem the CD without a substantial penalty. Callable CDs are being marketed via
newspaper ads, telephone solicitations and direct mail.
Before choosing any investment, it is important to determine how it will fit with your financial goals and
your tolerance for risk and will make sense given your income and living expenses.
If you’re considering purchasing a “callable” or “brokered” CD, become familiar with the following
terms. Also, ask the questions on the worksheet when you discuss CDs that are being offered by a broker.
Glossary of terms:
1. CD or Certificate of Deposit: A type of deposit account that may offer a higher rate of interest than a
regular savings account.
2. FDIC or Federal Deposit Insurance Corporation: In the event of a bank failure, federal deposit
insurance protects deposits up to $100,000 per depositor that are payable in the United States. You
can verify that the bank is FDIC-insured by calling the FDIC hotline, (800) 934-3342.
3. Call Feature: The issuing bank or brokerage firm, not the investor, may choose to terminate or “call”
the CD after a fixed period of time and pay back any principal with interest. For example, a “one-
year callable CD” may be “called” by the bank or firm after a year if interest rates fall.
4. Maturity Date: Ask to see the maturity date in writing. CDs can have maturity dates of up to 15 or
5. Issuer: It is important to know which bank or thrift issued your CD because FDIC coverage is
limited to $100,000 per depositor. If you have existing deposits at an institution and add a brokered
CD, it may pu