CDs. Who gets excited about those? You pick your maturity date and your interest rate and you're done. Thanks, bank. So long!

Well, guess what? Those are the old CDs. Oh, they're still around, and they're still a good options if you are looking to preserve your capital and pull in some predictable income.

But now, there's a newer option out there called "brokerage CDs." They are what they sound like: CDs sold through a brokerage firm instead of a bank. There are two huge differences between the old and the new that you need to know about:

Difference #1: Brokerage CDs often pay higher interest rates than CDs from your local bank because they are traded in the secondary market, sort of like a stock. So you might get a better rate with a brokered CD, but it comes with a little bit more risk and unpredictability, which I'll explain in just a minute.

Difference #2: And speaking of extra risk, here's something you absolutely must know: Brokerage CDs come with what's known as a "call" feature. Let me explain.

If I have a regular, old fashioned CD, my bank can't come to me and say, "Hey, buddy! Interest rates have changed and we want that CD back." However, this could happen to you with a brokerage CD.

That's a huge difference. With a traditional CD, you know exactly what you're getting and for how long, say 3% for six months. Boom. You're set. With a brokered CD, you may only get that rate for half the time you thought you would if the CD is called away from you. And, if you decide to reinvest that money, it may be at a lower rate!

Other Key Factors

Let's look at some of the other similarities and differences between the old and the new to help you decide which is right for you:

FDIC Insurance: This is very important, and it's the same for both traditional and brokerage CDs. FDIC limits the amount insured to $100,000 per CD, or $250,000 in certain retirement accounts.

Term: A traditional CD is usually a short-term vehicle to stash your cash. You can get one for three months, six months, a year, or even longer. You can also get medium-term CDs of two years, three years or five years. You receive a better interest rate than a checking or savings account because you promise to keep the money in the bank for a set amount of time. On a brokerage CD, the range of maturities is much bigger: three months to as much as 20 years! Keep in mind what we just talked about: the brokerage firm can call the CD back from you before its maturity date, so your return isn't guaranteed the way it is with a traditional CD.

Return: Interest rates on traditional CDs are locked in for the specified term, and interest is usually paid at maturity. With brokerage CDs, rates are also locked in but the interest is usually paid at specified intervals, such as monthly or semiannually. This could work to your advantage, depending on your income needs.

Liquidity: Early withdrawals are usually permitted from regular CDs, but often with a penalty. If you're under age 65 or even 62, chances are you'll get hit with some sort of penalty, like three months worth of interest–or more.

If you want to take your money out of a brokerage CD, you'll get whatever the market is paying for that CD at that time. This is the secondary market we talked about earlier and can be good or bad, depending on the circumstances. Yes, you have more flexibility, but the returns are much less unpredictable and you could end up getting back less than what you put into the CD in the first place.

The Dolan Bottom Line

Me, I'm a conservative guy when it comes to my CDs. I like to know what I'm going to get and over what period of time – and I'm willing to take a little bit less to get that. That's why Daria and I recommend traditional CDs for most investors as one option for stashing your cash.

If you're willing to take on additional risk, you could certainly consider brokerage CDs. Just be sure to thoroughly check all of the factors we've talked about today so you know exactly what you're getting into!

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