What Is A Jumbo CD?

Ben GranBanking Reviewer and Writer

Ben Gran is a freelance contributor for Forbes Advisor on banking. He also writes for The Ascent (a Motley Fool service), where he covers insurance, credit cards, personal finance and investing. Ben has over 10 years of experience as a freelance content writer for regional banks, tech startups, and financial services companies like LendingTree and Prudential. He also works as a ghostwriter for business executives, with bylines in publications such as Fast Company, Entrepreneur and TechCrunch.

Ben Gran

Ben GranBanking Reviewer and Writer

Banking Reviewer and Writer

Doug WhitemanEditorial Director, Financial Services

Doug Whiteman is an award-winning journalist with three decades of experience covering personal finance, starting when he was the Washington, D.C.-based consumer news editor and reporter for Associated Press Radio in the 1990s and early 2000s. He's passionate about making financial information clear and useful for consumers — taking personal finance from "Huh?" to "Ah!" He has been quoted by numerous media outlets including The Wall Street Journal, CBS News and USA Today.

Reviewed

Doug Whiteman

Doug WhitemanEditorial Director, Financial Services

Editorial Director, Financial Services

Reviewed

Updated: Jan 17, 2024, 2:07pm

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If you have a significant amount of cash in savings, and you want to keep your money safe while earning a decent yield, you may want to consider a jumbo CD.

Jumbo CDs work in the same way as regular CDs, typically requiring you to commit your money for a fixed term and earning a fixed interest rate. However, unlike other CDs that may only require a minimum deposit of $500 or less, a jumbo CD often requires a jumbo-sized minimum deposit of $100,000.

If you’re trying to choose between a CD or savings account, learn more about how jumbo CDs may fit into your financial plans.

What Is a Jumbo CD?

As the name suggests, a jumbo CD is a type of savings account that requires a large initial deposit—typically $100,000 or more. The money you deposit will earn interest that compounds in regular intervals, generally daily or monthly, throughout the life of the CD. Like regular CDs, Jumbo CDs typically have term lengths that range from three months to five years, though some can be as short as a few days or as long as a decade.

How Jumbo CDs Work

Jumbo CDs work the same way as regular CDs but with larger minimum deposit amounts. Jumbo CDs are often purchased by institutional investors with large sums of money to manage and need to put money into safe investments like CDs to protect their investors against risks. They can also be purchased for personal use.

Because the minimum deposit on a jumbo CD is so large, these CDs may pay better annual percentage yields (APYs) than regular CDs. In the current interest rate environment, CDs earn high yields overall with higher average rates than other savings accounts. Data is not available for jumbo CDs alone, and rates vary by institution and term, but you can often find slightly higher APYs on jumbo CDs than on other CDs.

In addition to potentially accessing better rates, there are several reasons to consider jumbo CDs as part of your savings strategy if you can meet deposit requirements.

What Is a Jumbo CD Rate?

A jumbo CD rate refers to the interest rate banks and credit unions offer on a jumbo CD. Jumbo CD rates are often higher than rates on regular CDs because jumbo CDs require larger deposits. Interest on jumbo CDs can be compounded daily or monthly. The more frequently interest compounds, the more you’ll earn over the life of your CD.

Jumbo CD rates can vary widely depending on the financial institution and factors like your deposit amount and the term length. To find the highest jumbo CD rates, compare multiple rates from different banks and credit unions for the term you’re interested in before making a decision. Our list of the best jumbo CD rates is an excellent place to start comparison shopping.

When To Consider a Jumbo CD

Many individual investors may never be the right fit to buy a jumbo CD. If you are an average middle-class wage earner trying to save and invest for retirement, you may not choose to put all that cash into a jumbo CD even if you do have $100,000 of investable assets.

Jumbo CDs tend to be more of a product for commercial banking customers and institutional investors than individuals. But if you are a high-net-worth investor and need FDIC-insured safety for your deposits, a jumbo CD could be an option for these conservative investment goals.

Advantages of Jumbo CDs

Jumbo CDs are not the best choice for every situation, but they offer a few advantages for investors who need safety and predictable returns:

FDIC insurance. Jumbo CDs are FDIC insured up to $250,000 per depositor for each ownership category in the event of a bank failure. If you want the government-backed guarantee of never losing your deposits, jumbo CDs can offer this safety.
Steady yields. Jumbo CDs offer fixed-rate APYs, just as regular CDs do. Longer-term jumbo CDs may offer a higher APY than shorter-term CDs.
Imposed discipline. Because CDs have set terms, it may be less tempting to draw on these funds than when your money is in a more readily accessible savings account.
Higher yields than bank savings accounts. Jumbo CDs typically pay a higher APY than a conventional bank savings or money market account.

Bottom line: Jumbo CDs—like other types of fixed-rate CDs)—are a safe, steady investment for people or institutional investors who want to avoid risks and generate a stable return. If you’re not worried about earning a high yield on your savings, and FDIC-insured safety is highly important to you, jumbo CDs can be a safe, reliable place to stash your cash.

Drawbacks of Jumbo CDs

Depending on your financial goals and risk tolerance, jumbo CDs might not be the right fit for your investment strategy. There are a few possible downsides to investing in jumbo CDs:

Lower rates than investing. Even though CDs currently earn competitive rates, your earning potential will likely be lower than if you were to invest in the stock market and other assets.
Early withdrawal penalties. Like other CDs, jumbo CDs typically charge a penalty for removing money. So if you need to pull your cash out of the CD before the stated term is up, you may have to pay an early withdrawal penalty (in the form of a certain number of days’ or months’ worth of interest). A savings account is a better option for cash you might need.
Low liquidity. Jumbo CDs often have terms of several years, meaning you must be comfortable locking up a significant chunk of change for a long time. If another opportunity comes along and you end up needing some of the money, you’ll be forced to pay penalty fees and forfeit some of your earnings.

Before you commit a significant amount of funds to a CD, make sure you understand the implications for liquidity and early withdrawal penalties to determine if this investment is really the right fit for your longer-term financial goals.

Jumbo CD vs. Regular CD

While jumbo CDs are much like regular CDs, there are a few key differences between them.

	Jumbo CD	Regular CD
Minimum deposit	Typically $100,000 or more	Can be $500 or less
FDIC insurance	Covered up to $250,000	Covered up to $250,000
Rates	Generally higher than regular CDs	Generally lower than jumbo CDs but higher than standard savings
Term length	Typically three months to five years, but can be as short as one week or as long as 10 years	Typically three months to five years, but can be as short as one week or as long as 10 years
Opportunity cost	May be higher than regular CDs because you tie up significant funds you could be investing elsewhere for better returns	Lower than jumbo CDs because they don’t require you to commit large deposits but higher than savings accounts
Best for	Investors with large sums to deposit who don’t want to invest and don’t need liquidity	Savers who want a safe place to grow funds over a fixed period and don’t need liquidity

Jumbo CD Rates vs. Regular CD Rates

Jumbo CDs tend to have slightly higher rates than regular CDs, both when comparing options at different institutions and two accounts at the same bank. Sometimes, jumbo CDs earn an additional 0.10% APY or more than regular CDs. Though the difference might not be substantial, it can notably impact your earnings when you have a large balance and a long investment timeline.

While jumbo CDs may offer somewhat better rates, regular CDs are a more accessible option for the average saver. Instead of solely basing your decision on which account offers the highest APY, ensure your choice also aligns with your financial circumstances and goals.

Which Banks Offer Jumbo CDs?

Several banks and credit unions offer jumbo CDs with minimum deposits of $100,000, including:

My eBanc
Rising Bank
KeyBank
State Department Federal Credit Union

Online banks and credit unions often offer the best jumbo CD rates, while CDs with big banks tend to have lower yields. Compare several options before choosing a jumbo CD.

Find The Best CD Rates Of 2024

Learn More

Bottom Line

Jumbo CDs are not the right solution for every saver or investor. Many people don’t have enough cash saved up to qualify for a jumbo CD’s minimum deposit. Other savers may want to earn a higher yield on their savings, even if that means accepting additional risk by investing in the stock or bond markets. For some conservative investment goals and savings plans, jumbo CDs may be a good way to keep deposits safe while earning a stable rate of return.