CDB, LCI or LCA: What is the Best Fixed Income Investment?

When you leave Savings, the first Fixed Income alphabet soups you encounter are CDB, LCI and LCA. All of them are conservative bank investments protected by the FGC (Credit Guarantee Fund) up to $250 thousand.

But which one yields more? The answer depends entirely on two variables: Term and Income Tax.

The Blind Spot: Income Tax

The CDB (Bank Deposit Certificate) pays interest that is subject to Income Tax according to the regressive table (varies from 22.5% in applications of up to 6 months to 15% after 2 years).

The LCI (Real Estate Credit Letters) and the LCA (Agribusiness Credit Letters) are 100% exempt from Income Tax for Individuals.

Many brokers offer CDBs that pay “110% of the CDI”, and LCIs that pay “90% of the CDI”. To the naked eye, 110% appears greater than 90%. But it's not quite like that!

Comparing Equivalent Rates

As the CDB will be bitten by the IR lion at the time of redemption, its net profitability falls.

If you invest to redeem in 1 year (17.5% tax), a CDB of 110% of the CDI will deliver, net, only 90.75% of the CDI. In other words, an exempt LCI that pays 92% of the CDI is, in fact, a higher investment than the CDB that promised 110%.

The Term and Liquidity Rule

Another crucial point: CDBs can have daily liquidity (you can redeem them any day). LCIs and LCAs now require long waiting periods set by the Central Bank (generally months before they can be redeemed). Therefore, LCI/LCA requires financial organization so as not to need the money in emergencies.

Make the Correct Comparison

Never rely solely on the rate announced by the bank. Use financial equivalence math.

Access our CDB, LCI and LCA Comparative Calculator, enter the rate promised by the broker and the period in which you intend to leave the money. The simulator will deduct the tax and show which paper puts more liquid money in your pocket on the day of redemption.