What Is a Jumbo CD?

A certificate of deposit, more commonly known as a CD, is a type of bank account that pays interest in exchange for the depositor leaving their funds in the account until it matures. A jumbo CD functions in the same way, though they require a higher minimum balance to open. Interest rates are usually fixed, though some accounts offer variable rates or “bump-up” features. Jumbo CDs tend to pay higher interest rates than their standard counterparts. Although you can technically withdraw your money before the maturity date, there’s typically a hefty penalty associated with doing so. Consider speaking to a financial advisor about how you can integrate a jumbo CD into your portfolio.

For all intents and purposes, a jumbo CD is exactly the same as a normal CD. You start by depositing money into the account and, in exchange for leaving your money untouched, you receive a higher interest rate than you would with most savings accounts. Interest is usually compounded in regular intervals (once a day or once a month) throughout the life of the CD.

Regular CD vs. Jumbo CD

Jumbo CDs are very similar to regular CDs but they do have a couple of major differences that you should be aware of before deciding to open an account.

More money to open: The main difference between a jumbo CD and a regular CD is that the former typically have very high minimum balance requirements. More specifically, a bank may require you to deposit $100,000 or more at account opening.
Higher interest rates: Interest rates on jumbo CDs are also typically higher than those of regular CDs, which should come as no surprise given the aforementioned minimums.

Pros and Cons of Jumbo CDs

Perhaps the best benefit of a jumbo CD is the fact that you’ll receive a higher interest rate than you would on a normal CD. Since CD rates are already higher than many savings accounts, jumbo CD rates can be especially great.

Jumbo CDs are also a risk-free investment. That’s because they’re insured up to $250,000 by the FDIC. Some jumbo CDs are also offered on a short-term basis, allowing customers with big sums of idle money to earn interest over periods of time as short as a week or a month.

Like any CD, the main drawback of a jumbo CD is the fact that your money is untouchable unless you’re willing to incur a large fee. While those who typically open a jumbo CD are far from short on cash, losing access to as much as $100,000 at once is nothing to scoff at.

Who a Jumbo CD Is Right For

A Jumbo CD can give some of the highest returns in all deposit accounts. These accounts are typically best used for short-term goals such as saving for a big event or a specific purpose. Many people use a jumbo CD to save for a down payment on a home or for an upcoming expensive event like a wedding.

The Bottom Line

If you have the money to invest in a jumbo CD, it can be one of the best investments you’ll find at a bank. Since they’re available largely risk-free because of FDIC insurance, consider whether they’d be a good fit for your investment portfolio. Talk with your bank to see what jumbo CD options they have available if you’re interested in investing.

Banking Tips

In addition to taking care of your banking needs, it’s a good idea to have an investment plan that helps you save for retirement. A financial advisor can help you manage these needs and personalize the approach to your situation. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
CDs aren’t the only way you can grow your savings at a bank. Check out SmartAsset’s list of the best savings accounts to find a savings rate that can help you grow your assets.