Jumbo CD

Jumbo CDs
First, there is the size of a jumbo CD (Certificate of Deposit). A jumbo CD usually starts at $100,000. These CDs are considered low-risk secure investments for large investors. Secondly, Jumbo CDs has the same basic characteristics as a traditional certificate of deposit. Like a standard CD, the maturity date exists, typically in the range of 3 months to 5 years.

Certificates of deposit are FDIC insured, and therefore guarantee a return of principal. FDIC insurance, however, will only cover up to $250,000 for this type of investment. The amount deposited that exceeds the FDIC limits is not insured. See the FDIC’s website at www.fdic.gov to learn more. By structuring the Jumbo CDs in different accounts (ownership) and at different banks the investor can manage to deposit several million dollars with FDIC insurance coverage.

A Jumbo CD can typically deliver a higher rate of return than comparable cash investments such as money market accounts and/or savings accounts. The certificate rate of return directly relates to the amount of time that the principal remains intact. The longer that it takes a CD to mature, the higher the rate of return. For example, a five-year CD will carry a higher APY (annual percentage yield) than the same amount of principal locked in a six-month CD. Due to the commitment of such large amounts of money, a Jumbo CD rate of return is better than that of a smaller CD with the same maturity date.

In exchange for a slightly higher rate of return, certificates of deposit do not have the liquidity that other savings vehicles carry. Withdrawing principal early results in penalty fees or a return of a portion of returns, and those penalties can be particularly severe with a Jumbo CD.

Due to the large principal involved, jumbo CDs tend to be cash instruments for institutional investors such as banks or pension funds, both organizations with significant capital seeking stable investments. A jumbo CD can also be of value to wealthy individuals with large cash holdings looking for a guaranteed return without need to access principal in the short term.

Please feel free to review the current CD rates available above on our home page at BestCdRates.com where you can find today’s rates for money market funds and savings accounts as well.

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