You can buy municipal bonds through a broker, a bank, a financial advisor, or directly from the issuer
Municipal bonds are sold through several different channels, and which one you use depends on how much you want to invest, whether you want professional guidance, and how much you are willing to pay in fees. The most common route is a brokerage account — either online or through a traditional firm — where you can search and purchase bonds from a large inventory. Banks also sell municipal bonds, often to customers who already have accounts there. You can also work with a financial advisor who buys bonds on your behalf. Some issuers, particularly larger cities and states, sell bonds directly to the public through their own offerings, though this is less common for individual investors.
Each channel has different costs, different bond selections, and different levels of service. Understanding what each offers helps you decide which fits your situation and how much you will actually pay.
Key Takeaways
- Online brokerages typically offer the widest selection of municipal bonds and lower transaction costs than traditional brokers or banks.
- Banks sell municipal bonds primarily to existing customers and often charge higher markups than brokerages, though you may get personal service.
- Financial advisors buy bonds on your behalf and charge either a flat fee, a percentage of assets, or a commission on each trade.
- Direct offerings from issuers are rare for individual investors but carry no middleman markup when they are available.
- The same bond may be priced differently depending on where you buy it, so comparing costs across channels matters for larger purchases.
Online brokerages: the largest selection and lowest markups
Online brokerages like Fidelity, Charles Schwab, E*TRADE, and TD Ameritrade maintain inventories of thousands of municipal bonds available for purchase. These platforms let you search by state, maturity date, credit rating, and yield, then buy directly through your account. The transaction cost is typically a flat fee per trade — often $0 to $10 — or a small markup built into the price you pay. For a $10,000 bond purchase, the markup is usually between $10 and $50.
Online brokerages work best if you want to compare many bonds quickly, make your own decisions, and keep costs low. You do not get personal information, and you need to understand bond basics like duration, credit rating, and call provisions before you buy. Most online brokerages also offer municipal bond mutual funds and exchange-traded funds (ETFs) if you prefer a managed option instead of picking individual bonds.
To buy through an online brokerage, you open an account, fund it, and search their municipal bond inventory. The process takes a few days from start to purchase. Some brokerages also offer a secondary market where individual investors sell bonds they already own, which can give you access to older bonds with different terms.
Traditional brokerages and financial advisors: personal service and higher costs
Full-service brokerages like Merrill Lynch, Morgan Stanley, and UBS, as well as independent financial advisors, buy municipal bonds on behalf of their clients. These firms typically have access to the same bond inventory as online brokerages, but they charge for the service. A traditional broker may charge a commission of 1% to 2% on each municipal bond trade, meaning a $10,000 purchase costs $100 to $200 in fees. A financial advisor might charge a flat fee per transaction, an annual percentage of your assets under management (often 0.5% to 1.5%), or a combination.
The advantage is personal guidance: an advisor can discuss your tax situation, your time horizon, and your risk tolerance, then recommend specific bonds or a bond portfolio. They also handle the paperwork and monitor your holdings. This service is worth the higher cost if you are buying a large amount, if you are new to bonds, or if you want someone else to manage the decisions.
If you work with an advisor, ask upfront how they are paid. Some advisors are fiduciaries, meaning they are legally required to act in your best interest; others are not. Fiduciary advisors are generally preferable, though they may charge higher fees.
Banks: convenience for existing customers, higher markups
Most banks sell municipal bonds to their customers, particularly those with substantial savings or investment accounts. Bank bond departments typically offer a smaller selection than brokerages — usually 100 to 500 bonds rather than thousands — and charge markups of $25 to $100 or more per bond. On a $10,000 purchase, that can mean paying 0.25% to 1% in markup costs.
Banks are convenient if you already have a relationship there and prefer to handle everything in one place. A bank representative can walk you through the purchase and answer basic questions. However, you are paying for that convenience through higher costs, and the bond selection is limited. Banks are most useful for smaller purchases or if you want to keep your investments straightforward and centralized.
If you buy through a bank, ask the representative to show you the markup in writing before you commit. Some banks disclose it clearly; others bury it in the pricing.
Direct offerings from issuers: rare but no middleman markup
Some states and large cities offer municipal bonds directly to the public through their treasury or finance departments. These direct offerings typically happen when a state or city is issuing a large bond and wants to reach individual investors without paying underwriter fees. When available, direct offerings carry no middleman markup — you pay the exact price the issuer sets.
Direct offerings are uncommon and usually announced through the issuer's website or through financial news outlets. They are most likely to occur during large infrastructure or education bond issuances. To learn about your state or city is offering bonds directly, check the state treasurer's website or the municipal bond section of the Government Finance Officers Association website.
The downside is that direct offerings have limited availability, often sell out quickly, and require you to research and decide on your own. You also cannot easily sell the bond before maturity if you need the money — there is no secondary market for bonds sold directly to individuals.
Secondary market: buying bonds other investors are selling
After a municipal bond is first issued, it trades on the secondary market — meaning existing bondholders can sell to new buyers. Most of the municipal bonds available for purchase through brokerages are secondary market bonds, not newly issued ones. Secondary market bonds may have different prices and yields than when they were first issued, depending on interest rates and the issuer's credit quality.
The advantage of the secondary market is selection: you can find bonds with specific maturity dates, yields, and credit ratings that match your needs. The disadvantage is that you cannot always find exactly what you want, and prices can vary significantly between dealers. This is why comparing prices across brokerages matters — the same secondary market bond may be priced differently depending on which broker you use.
Comparing costs across channels
The cost of buying a municipal bond varies significantly depending on where you purchase it. For a $10,000 purchase, an online brokerage might charge $10 to $50 in total costs, while a bank could charge $25 to $100 in markup, and a traditional broker could charge $100 to $200 in commission. For a $100,000 purchase, these differences multiply: online brokerages might cost $100 to $500, banks $250 to $1,000, and traditional brokers $1,000 to $2,000.
The table below shows typical costs, selection size, and best use cases for each channel. If you are buying a significant amount, comparing at least two channels before you commit is worth the time. Even a difference of 0.5% in costs can mean hundreds of dollars on a large purchase.
| Channel | Typical Cost | Selection | Best For |
|---|---|---|---|
| Online brokerage | $0–$10 per trade or $10–$50 markup | Thousands of bonds | Large purchases, self-directed investors, cost-conscious buyers |
| Traditional broker or advisor | 1–2% commission or flat fee per trade | Thousands of bonds (same as online) | Investors who want guidance, large portfolios, complex situations |
| Bank | $25–$100+ markup per bond | 100–500 bonds | Existing customers, small purchases, simplicity |
| Direct from issuer | No markup | Limited to current offering | Large issuances, investors who want to avoid fees |
Frequently Asked Questions
Can I buy municipal bonds directly from the city or state that issued them?
Rarely. Most cities and states sell new bond issuances through underwriters, not directly to individuals. However, some large issuances do offer a direct purchase option. Check your state treasurer's website or the issuer's finance department to see if they have a current offering.
Do I need a brokerage account to buy municipal bonds?
Not necessarily. You can buy through a bank if you have an account there, or through a financial advisor without opening a separate brokerage account. However, a brokerage account gives you the most options and typically the lowest costs.
What is the minimum amount I need to invest in municipal bonds?
Most municipal bonds are issued in $5,000 increments, so $5,000 is the typical minimum for a single bond. Some brokerages and advisors may have higher minimums. Bond mutual funds and ETFs often have lower minimums, sometimes $1,000 or less.
Can I sell a municipal bond before it matures?
Yes, through the secondary market. You can sell to another investor through your broker, though the price may be higher or lower than what you paid depending on interest rates and the issuer's credit quality. Bonds sold directly from an issuer to individuals typically cannot be sold on the secondary market.
How do I know if a broker is charging me a fair price?
Ask the broker to disclose the markup or commission in writing before you buy. For secondary market bonds, you can call another broker and ask for a price quote on the same bond to compare. Markups typically range from $10 to $100 per bond depending on the bond's size and liquidity.