What is a jumbo CD?

A jumbo CD rate is the interest rate offered on a certificate of deposit, typically one with a large initial investment. Jumbo CD interest rates tend to be higher than paid on a traditional CD, typically making them one of the highest interest rate CDs available. Read on to learn more, including what a jumbo CD is and how to acquire high CD rates without the large initial investment typical of jumbo CDs.

A jumbo CD (certificate of deposit) is a specialized type of fixed-term account that requires a much larger initial investment, typically of $100,000 or more.  The term “jumbo” does not refer to the interest rate or term length, but rather to the higher minimum amount of money that is required to open and maintain these accounts.

Just because you have a large amount to invest doesn’t necessarily mean you need to find a product called “jumbo CD,” however. At Raisin, we don’t differentiate between CDs based on balance size. All of the CDs available in our platform have just a $1 minimum deposit to open, allowing savvy savers to find the highest interest rate CD that works for them — without the need for reaching jumbo CD account minimums.

For institutions that have this differentiation, jumbo CDs may offer higher interest rates than smaller CDs and traditional savings accounts. They are usually offered by banks, credit unions, and other financial institutions and are seen as less risky due to the larger initial investment. The interest rate for a jumbo CD is typically fixed for the term of the CD, which can range anywhere from three months to five years. 

Jumbo CDs or fixed-term CDs with a larger initial investment may be a good option for people with a large amount of cash that they do not need immediate access to, as they offer the possibility to earn higher interest rates on their savings. They are also generally considered to be low-risk investments.

In order to make an informed decision to secure the best jumbo CD rates, it’s important to consider the term length (or how long it will take the CD to mature), the institution offering the CD, and the liquidity of the account.

One of the primary advantages of jumbo CDs is the higher interest rates they offer compared to regular CDs and traditional savings accounts. Generally, the longer the term, the higher the interest rate will be. For example, a five-year jumbo CD rate will typically be higher than a six-month or three-month jumbo CD rate.

These short-term investments are a good option for investors who want the highest interest rate CD possible without committing to a long-term investment. However, it is important to keep in mind that short-term jumbo CDs may not offer as high of an interest rate as longer-term options. Financial institutions are willing to pay a premium in interest for the opportunity to hold onto your funds for longer, uninterrupted periods of time.

Typically, the more money you deposit into a jumbo CD, the higher the interest rate you can earn. For example, a bank may offer a 1.5% jumbo CD interest rate with a balance of $100,000 or more, but only a 1% jumbo CD interest rate with a balance below $100,000.

On the Raisin platform, our partners' rates are competitive no matter your initial deposit amount, allowing you to earn at the same APY whether you put in $1 or $100,000.

At institutions that differentiate between CDs based on deposit size, a one-time, lump-sum deposit of at least $100,000 or more is typically required, depending on the financial institution.

Just like with a non-jumbo fixed-term CD and like all CDs offered through Raisin, once you’ve made your deposit, the bank or credit union will agree to pay you a fixed interest rate for a set period of time. During this time, your deposit is effectively locked in, meaning you won’t be able to withdraw any funds without paying an early withdrawal penalty.

At the end of the term, you’ll receive your original deposit plus any interest earned, which is typically paid out in a lump sum. You can then choose to either roll your funds over or withdraw your funds without penalty.

At Raisin, customers can visit their account dashboard and easily change their CD rollover preferences up until a CD is set to mature.

While you may be able to withdraw money from a jumbo CD account before the maturity date, this will typically come with an early withdrawal penalty. The specific penalty amount and terms will vary depending on the institution.

If you have a CD through Raisin, you can consult the product information sheet for the CD or reach out to Raisin's customer service to help you determine the penalties for withdrawing early.

A jumbo CD account may be used for a variety of purposes, including but not limited to:

• Investment: A jumbo CD can be an attractive investment option for people looking for a low-risk way to earn a fixed rate of return on their cash.

• Savings: A jumbo CD can be used as a way to save a large sum of money that you don’t need immediate access to.

• Diversification: A jumbo CD can be a great way to diversify your investment portfolio by adding a low-risk asset with a fixed return.

• Estate planning: A jumbo CD can be used as part of an estate plan to pass on wealth to heirs and/or beneficiaries.

• Short-term funding: A jumbo CD may also be used by a small business as a way to secure short-term funding for a project, or even to help cover payroll expenses.

Before making a decision on which jumbo CD to go with, it's important to research and compare the terms and conditions to find one that fits your financial goals and needs. There are many different types of jumbo CDs available, including:

• Traditional jumbo CDs  are the most common type of jumbo CD, which typically require a minimum deposit of $100,000 or more and offers a fixed interest rate for a specific term, which can range from several months to several years. 

• Callable jumbo CDs allow the issuing bank or credit union to “call” or redeem the CD before the maturity date, usually after a specified period of time has passed. Callable CDs may offer higher interest rates than traditional CDs, but they also come with additional risk.

• Step-up jumbo CDs offer a rising interest rate over the course of the term. The interest rate on a step-up CD may increase at predetermined intervals, such as every six months or every year.

• Bump-up jumbo CD allow the investor to request a higher interest rate if rates go up during the term of the CD. Typically, only one rate increase is allowed during the term.

• Brokered jumbo CDs are sold through a brokerage firm instead of directly from a bank or credit union. Brokered CDs may offer higher interest rates than traditional CDs, but they may also come with additional fees or commissions.