secondary market CDs aren't FDIC insured?

[Brook2]

[UPDATE: Question was answered]

I just saw this message when trying to buy a CD on Fidelity:

For the purposes of FDIC insurance coverage limits, all depository assets of the account holder at the institution issuing the CD will generally be counted toward the aggregate limit (usually $250,000) for each applicable category of account. In some cases, CDs may be purchased on the secondary market at a price that reflects a premium to their principal value. This premium is ineligible for FDIC insurance.


I'm new to buying CD's and this is new information to me, that secondary market CDs aren't FDIC insured.

 

[USGrant1962]

That is not what your quoted message says - it says any premium paid above principal is not insured. The base CD value is insured. Not ideal but nothing like saying "CDs aren't FDIC insured".

 

[pb4uski]

That is not what your quoted message says - it says any premium paid above principal is not insured. The base CD value is insured. Not ideal but nothing like saying "CDs aren't FDIC insured".

+1 OP and OP title is misleading. Perhaps the OP doesn't understand what the quoted part means.

If you buy $250,000 of CDs in the secondary market at $101, then you would have $2,500 that would not be FDIC insured.

Besides, I just looked at all my holdings and I have one lonely CD that was purchased at a premium... a whopping $186 for all my CDs combined.

New is when you buy new issue CDs... new to the market... secondary is not new issue where one investor sells their CD to another investor in the secondary market. If you transferred CDs from Vanguard to Fidelity it doesn't change the CD's status.

Look at your cost basis... if your cost basis is less than the par/stated value then you are 100% FDIC insured... if your cost basis exceeds the par/stated value then the excess is not FDIC insured.

 

[Chuckanut]

What the warning means is this: You buy a CD with a face value of $5000. Because interest rates changed you are paying a bit extra for the CD, say $5200 total. If the bank fails and the FDIC has to take over, it will only pay you the $5000 face value of the CD. The extra $200 premium is lost. That’s how I read it.

 

[pb4uski]

+1 Exactly.

 

[Badger]

I was always under the impression that the FDIC insurance covered the total money in all the accounts at one bank up to the maximum amount allowed. I like to keep things simple so I don't think I will ever buy secondary market CDs.
What is the FDIC coverage if you are at the over the maximum amount allowed for FDIC insurance but the accounts have beneficiaries?

Cheers!