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If you want to grow your money but keep it safe from the turbulence of the stock market, a certificate of deposit (CD) may be a good option.
“A jumbo CD is a CD with a high minimum deposit — usually around $100,000 — that pays a higher interest rate than a regular CD. You may consider a jumbo CD if you have around $100,000 and want to earn a guaranteed rate of return. Jumbo CDs often pay higher rates than regular CDs.
Jumbo CDs aren’t super common, and ones that pay high interest rates are even less common. Keep reading to learn more about the institutions paying the best rates.
Why it stands out: You’ll earn the highest rates with a $100,000 minimum — but you can still earn good rates with lower balances. Navy Federal compounds your interest daily like most banks would, unlike many credit unions that compound monthly. Navy Federal also offers terms for up to 7 years, while many banks cap out at 5 years.
Term length options: 3 months to 7 years
What to look out for: Membership. You or a family member must have ties to the military for you to become a member of Navy Federal.
Why it stands out: Consumers Credit Union pays competitive rates on jumbo CDs, especially for longer terms. Consumers makes it easier to become a member than most credit unions do — you just have pay $5 to join the Consumers Cooperative Association, then deposit $5 in a Consumers savings account. Unlike most credit unions, Consumers compounds interest daily, meaning you can earn more money in the long run.
Term length options: 91 days to 5 years
What to look out for: Consumers Credit Union doesn’t have any major downfalls, but you might earn a higher rates at another institution, depending on the term length.
Why it stands out: CIT Bank pays good rates on jumbo CDs, and it charges standard early withdrawal penalties should you need to take out money before your CD matures.
Term length options: 2 years to 5 years
What to look out for: Limited term lengths. Your only choices are a 2-year, 3-year, 4-year, or 5-year jumbo CD. If you want other term lengths, you can either choose another institution or open another type of CD with CIT Bank.
Why it stands out: USAA has a wider range of term lengths than most banks, which makes it easy to find a jumbo CD that fits your needs. It also pays good rates on longer-term CDs.
Term length options: 30 days to 7 years
What to look out for: Compound interest. The other institutions on our list compound interest daily, but USAA only compounds interest monthly. This limits how much you’ll earn over the months or years.
What is a CD?
A CD is basically a time-sensitive savings account that holds your money at a fixed interest rate for a specified period of time. You can open one at almost any bank or credit union.
If you don’t need immediate access to your savings, a CD can guarantee a return on your money since you lock in a fixed annual percentage yield (APY) for the term of the CD. During that period, you typically won’t be able to add additional money or access your original balance without paying a penalty.
You will, however, earn interest on the amount and have the option to collect those payments monthly or reinvest them into your CD. Most banks offer varying rates for different terms and deposit amounts — typically, the longer the term, the higher the rate.
At the CD’s maturity date, you’ll typically have a 10 to 14-day grace period in which you can withdraw your money and close the account or renew the term.
What is a jumbo CD?
A jumbo CD is a certificate of deposit that requires a high minimum deposit — usually around $100,000. As a reward for placing this large deposit, you’ll earn a higher interest rate than you would on a regular CD.
What’s the difference between a jumbo CD and regular CD?
The main distinctions are that a jumbo CD requires a higher deposit, and it usually pays a higher rate. Some banks also offer different term lengths for its jumbo and regular CDs. For example, CIT Bank’s shortest term for a jumbo CD is 2 years, but you can get a CIT regular CD with a term as short as 6 months.
What are the pros of a jumbo CD?
Higher interest rates. In many cases, banks pay higher interest rates on jumbo CDs than on regular CDs.
Guaranteed rate of return. You’re putting a lot of money into a jumbo CD. If you were to put that money into a riskier investment, such as the stock market, you wouldn’t know how much you’d end up with in a few months or years. With a jumbo CD, you know exactly how much you’ll earn.
What are the cons of a jumbo CD?
Higher minimum deposits. Regular CDs typically require a few hundred or a few thousand dollars, but you’ll need around $100,000 to open a jumbo CD.
The rate isn’t always better. Banks usually pay higher rates on jumbo CDs — but not always. Also, you could find a different bank that pays better rates on regular CDs than a certain bank pays on jumbo CDs.
Inflation. Depending on how long you store money in a CD and how high the rate is, the interest rate might not keep up with inflation.
Consider investing instead. Everyone’s financial situation is different. Playing it safe by putting $100,000 in a CD could be the right move for you. But if you put money in riskier investments, you might earn more in the long run.
Is a jumbo CD a good investment?
CDs aren’t generally considered investments the same way something like an index fund, which puts your money into the stock market, is. Instead, a CD is typically viewed as a type of savings account, and your potential for losses and gains — your risk — is much more limited. Because the stock market is risky, experts generally don’t advise investing money you’ll need in the next five years. In the case of a stock market drop, you wouldn’t have time to make up your losses.
If you need to access your money in three years and want a guaranteed rate of return, a 3-year jumbo CD is a better choice than a different type of investment account.
If you’re comfortable parting with your money for longer and want to take more risk with your money, then you may want to invest in the stock market. One way to do this is through tax-advantaged retirement accounts, like a 401(k) or IRA, which grows your money over decades. Another is through brokerage accounts, which are useful tools to build long-term wealth, but can’t guarantee a given return like a CD can.
There is such a thing as an IRA CD, which is sort of a combo savings/investment account. It’s a safe investment tool that may be a worthwhile option for people who are close to retirement age.