What is a Jumbo CD and How Does it Work?

Jumbo certificates of deposit (CDs) are secure, low-risk investments offered by banks and credit unions, usually with minimum deposits of $100,000. Jumbo CDs typically have a higher interest rate compared to regular CDs. If you're considering making a jumbo CD part of your retirement portfolio learn more about how they work and how you can begin to invest.

  • Written by
    Lindsey Crossmier

    Lindsey Crossmier

    Financial Writer

    Lindsey Crossmier is an accomplished writer with experience working for The Florida Review and Bookstar PR. As a financial writer, she covers Medicare, life insurance and dental insurance topics for RetireGuide. Research-based data drives her work.

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  • Edited By
    Michael Santiago
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    Michael Santiago

    Senior Financial Editor

    Michael Santiago, a senior financial editor, joined RetireGuide in 2023. With over 10 years of professional writing and editing experience, he brings a wealth of expertise in creating content for diverse industries, including travel and healthcare. Having traveled to more than 40 countries across five continents and lived in Europe and Asia for several years, Michael's global perspective enriches his work. He combines his strong writing skills, editorial judgment and passion for crafting accurate and engrossing content to enhance the user experience on RetireGuide.

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  • Reviewed By
    Timothy Li, MBA
    Timothy Li, MBA, Business Finance Manager

    Timothy Li, MBA

    Business Finance Manager

    Timothy, an experienced consultant and finance manager, excels in uncovering narratives within financial data for CEOs and CFOs. With a focus on enhancing profitability, he leads conference calls, analyzes performance trends and provides financial training. Holding an MBA from USC and an economics degree from UCLA, Timothy is well-equipped to navigate the intricacies of the business world.

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  • Published: June 26, 2023
  • Updated: July 17, 2023
  • 6 min read time
  • This page features 3 Cited Research Articles
Fact Checked
Fact Checked

A qualified expert reviewed the content on this page to ensure it is factually accurate, meets current industry standards and helps readers achieve a better understanding of retirement topics.

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How to Cite RetireGuide.com's Article

APA Crossmier, L. (2023, July 17). What is a Jumbo CD and How Does it Work? RetireGuide.com. Retrieved February 29, 2024, from https://www.retireguide.com/retirement-planning/investing/certificate-of-deposit/jumbo-cd/

MLA Crossmier, Lindsey. "What is a Jumbo CD and How Does it Work?" RetireGuide.com, 17 Jul 2023, https://www.retireguide.com/retirement-planning/investing/certificate-of-deposit/jumbo-cd/.

Chicago Crossmier, Lindsey. "What is a Jumbo CD and How Does it Work?" RetireGuide.com. Last modified July 17, 2023. https://www.retireguide.com/retirement-planning/investing/certificate-of-deposit/jumbo-cd/.

Key Takeaways
  • Jumbo CDs are certificates of deposit issued by banks and credit unions for high minimum deposits, typically $100,000 or more.
  • Like traditional CDs, your funds are locked in for the entire deposit term, which can range from 90 days to five years.
  • You will have to pay a penalty if you withdraw funds from your jumbo CD before it matures, which could consist of a large portion of the earned interest or even some of the principal.
  • Jumbo CDs are covered by the Federal Deposit Insurance Corporation (FDIC) up to the limit of $250,000 per person, per bank.

What Is A Jumbo CD?

A jumbo CD is a certificate of deposit with a large minimum deposit, usually starting at $100,000. Like a regular CD, a jumbo CD offers interest in exchange for a fixed-term deposit, generally between three months and five years. Jumbo CDs are considered secure investments that can be a low-risk addition to your retirement portfolio.

Because jumbo CDs require much larger minimum deposits than traditional CDs, they usually come with higher interest rates. Some financial institutions increase interest rates as the deposit term lengthens, while others may offer better rates for shorter periods. If you’re considering a jumbo CD, it pays to shop around for the best rates.

How Do Jumbo CDs Work?

The typical minimum deposit for a jumbo CD is $100,000, although some financial institutions only require $50,000. Jumbo CDs are also protected up to a certain amount. The Federal Deposit Insurance Corporation, or FDIC, covers deposits up to $250,000 per person, per bank. For instance, if you have $200,000 in a jumbo CD, $20,000 in your checking account and $25,000 in your savings accounts all at the same bank, your deposits will be fully covered by the FDIC.

The funds you use to invest in a jumbo CD account will be locked in for the entire term of the investment, whether that term is 9 months or five years. If you withdraw from the account before the term ends, the penalty could erase much of the earned interest or even some of the principal.

The interest rates on most jumbo CDs are fixed rather than variable, meaning the rate remains the same over the entire life of the CD. Depending on the issuing financial institution and the length of the term, interest might be paid during certain intervals throughout the term, or at the end.

Jumbo CDs are a low-risk vehicle to store away funds for a rainy day. Consider whether the interest rate offered is worth the high minimum deposit. Contact a financial professional to determine whether jumbo CDs would align with your goals.

Pros and Cons of Jumbo CDs

Although jumbo CDs are considered low risk, they are still a significant investment. As such they come with both advantages and disadvantages. Weighing the pros and cons is an important part of maintaining a retirement portfolio that works to your advantage.

Jumbo CDs: Pros and Cons
  • Jumbo CDs usually offer higher interest rates than regular CDs
  • CDs are low-risk investments that can help you balance your portfolio
  • They are covered by FDIC insurance up to $250,000
  • You can use jumbo CDs to earn a little extra on large amounts over the short term
  • The minimum required deposit is high – usually $100,000 – and your money is inaccessible for the entire term of the CD
  • If you withdraw your funds due to an emergency, you will have to pay a hefty penalty
  • The low-risk nature of CDs often comes with lower rates of return
  • Locking your money away could mean you miss the chance to make other potentially more lucrative investments
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Investing in Jumbo CDs

Jumbo CDs are offered by most financial institutions. Each bank and credit union will set its own interest rate and minimum required deposit. Most minimum deposits start at $100,000, but some can be as low as $50,000. Be sure to shop around for the jumbo CD that best fits your needs. Also, familiarize yourself with all the terms and conditions of your jumbo CD account, including when and how interest is paid, and what penalties you will pay if you need to withdraw your funds early.

How To Get Started
  • Choose a bank or credit union.
  • Determine the minimum deposit requirement.
  • Open an account.
  • Decide on the term.
  • Fund the account.
  • Wait for your jumbo CD to mature.

Is a Jumbo CD Right for You?

If you have a large amount of money you’d like to grow, while reducing your exposure to risk, a jumbo CD might be a good fit for you. A jumbo CD lets you earn more interest than with a regular savings or checking account, without resorting to the uncertainty of the stock market. In addition, they can provide a low-risk option for your financial retirement plan that diversifies your portfolio.

The initial deposit is large, but the term limit can be short, giving you the chance to earn extra interest on funds that may be set aside for other purposes further down the line. Consult with a trusted financial advisor before making any major investment decisions.

Alternatives to Jumbo CDs

While jumbo CDs can be a good investment if you want to diversify your retirement portfolio, they’re not the right choice for everyone in every instance. Other products might better suit your specific needs or situation. Don’t hesitate to reach out to your financial advisor for advice before making investment decisions.

Exploring Alternatives to Jumbo CDs
High-Yield Savings Account
Driven by the rise of online-only banks, these savings accounts with higher-than-normal interest rates are now available at many traditional financial institutions. They may have deposit minimums and come with fees, but they also pay substantially more interest while allowing you easier access to your funds.
Money Market Accounts
These accounts offer higher interest than traditional savings accounts and some include features that are found in checking accounts. Money market accounts are available at many banks and credit unions.
Short-Term Bond Funds
Because short-term bond funds invest in bonds that mature within five years or less, these funds can provide you with income while lessening your risk.
Treasury Bills
Treasury Bills are short-term investments that offer terms between four weeks and one year. They are issued and sold at a discount and mature at face value. The U.S. government backs them, and they are considered extremely safe investments.
Municipal Bonds
Offered by local, county and state governments, municipal bonds are debt securities used to collect funds for capital improvements like building highways or schools. In addition, the interest they earn is often tax-free.
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Frequently Asked Questions About Jumbo CDs

Are jumbo CDs negotiable?
Jumbo CDs are often negotiable. Some negotiable jumbo CDs have higher required minimums, up to $1 million or more. However, keep in mind, CDs are only insured up to $250,000 per depositor, per bank.
How long are the terms for a jumbo CD?
Terms for jumbo CDs can range from three months to five years or more. The terms can be even shorter with very large jumbo CDs, sometimes as little as a week.
Are jumbo CDs FDIC insured?
Jumbo CDs are insured under the FDIC, up to $250,000 total per person, per bank.

Editor Malori Malone contributed to this article.


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Last Modified: July 17, 2023

3 Cited Research Articles

  1. Federal Deposit Insurance Corporation. (2023, April 3). Your Insured Deposits. Retrieved from https://www.fdic.gov/resources/deposit-insurance/brochures/insured-deposits/
  2. U.S. Securities and Exchange Commission. (2023). Certificates of Deposit (CDs). Retrieved from https://www.investor.gov/introduction-investing/investing-basics/investment-products/certificates-deposit-cds
  3. U.S. Treasury Department. (2023). Treasury Bills. Retrieved from https://www.treasurydirect.gov/marketable-securities/treasury-bills/