What is a jumbo CD? (Spoiler: Bigger isn't always better)

Are you looking to invest a large sum of money and earn a guaranteed return? A jumbo CD might be the answer, but don't be fooled by the name — bigger doesn't always mean better. 

While jumbo CDs typically require a minimum deposit of $100,000 or more, they don't always have the highest interest rates. In fact, some regular CDs with lower minimum deposits may have better rates due to increased competition among banks. 

So, before you lock your money away, take some time to understand what a jumbo CDs is, how it works and if it's the right choice for your financial goals.

What is a jumbo CD?

A jumbo CD is a certificate of deposit that requires a higher minimum deposit — typically $100,000. Like regular CDs, jumbo CDs come with a fixed interest rate and term. 

They're attractive to businesses, which may use them as a way to earn extra money on idle funds. But if you have more than $100,000 to comfortably invest and are retiring soon, a jumbo CD could be a low-risk way to earn a guaranteed return on a portion of your savings. 

How does a jumbo CD work?

A jumbo CD works just like a regular CD, but with a higher minimum deposit requirement. You select a term, deposit your money and receive your principal plus interest when the CD matures. 

Jumbo CDs differ from traditional CDs in that the length of the term is customizable — it can be as short as seven days or as long as 10 years, throughout which you agree to leave the money untouched.

If you need to make a withdrawal before the term ends, you’ll risk paying a penalty. Penalties vary by bank and account, though here’s an idea of what Chase Bank charges for early withdrawal penalties: 

• 90 days interest for CD terms of less than six months

• 180 days interest for CD terms six months to 23 months

• 365 days interest for CD terms of 24 months and longer 

Do jumbo CDs have higher interest rates? 

It’s not always true that jumbo CDs have a higher interest rate than traditional CDs, however much it’s a common belief. There’s more competition for regular CDs, so banks have to fight harder for new customers. And they “fight” by offering stronger APYs. 

If you’re comparing CD rates at only one bank, you’ll almost always find that the bank’s jumbo rates are better than its standard rates. (This is the bank’s way of rewarding you for giving it more money.)

But once you start comparing multiple banks to one another, you may find some have standard rates much higher than jumbo rates elsewhere. This is why it pays to shop around. 

If you have a jumbo-size deposit, don’t feel like you have to stick with jumbo CDs only. You may find higher rates for traditional CDs.

???? Expert tip: Just because a CD is labeled jumbo doesn't always mean it offers the best rates. Don’t overlook competitive rates for regular CDs with lower minimum deposits.

Benefits of jumbo CDs

• High interest rates. Jumbo CDs often offer higher interest rates than traditional CDs. 

• Guaranteed rates of return. Fixed interest rates help you to know exactly how much you’ll earn at maturity.

• Insured up to $250,000. CD deposits and interest earned are insured by the FDIC or NCUA for up to the federal limit per person, per account. 

Drawbacks of jumbo CDs

• High minimum deposit. Most jumbo CDs require a minimum deposit of $100,000 or more. 

• Early withdrawal penalties. If you need your money early, you’ll pay a fee equal to as much as half your simple interest earned over the term, like traditional CDs.

• Not always the highest APYs. You might find a better rate by comparing traditional CDs. 

Dig deeper: When is it worth it to break a CD? A finance expert's take on early withdrawals and breaking even

How to compare jumbo CDs

If you’re considering a jumbo CD, use these tips to find the best rates and most valuable perks to fit your financial goals and budget: 

• Annual percentage yields. A higher APY makes for more money in your pocket, so compare rates from different banks and across multiple accounts to find the strongest yields. And don’t forget to look beyond jumbo options to traditional CD rates.

• Term lengths. Some banks offer promotional jumbo rates on terms of up to 12 months. In this current high-rate environment, don’t assume longer terms are always higher.

• Early withdrawal penalties. Life happens, and if you need to access your funds before the term ends, you don't want to be slapped with hefty fees that eat away at your earnings. Look for jumbo CDs with reasonable penalties — or even no-penalty options, if liquidity is a concern.

• Find out your interest payout options. Some banks allow penalty-free interest withdrawals before maturity. If you’d like to receive your interest early, look for these options. But know that this will reduce your compound interest potential.

• Use a jumbo CD calculator to calculate your earnings. Plug in different APYs, term lengths, and deposit amounts to see how much you could earn over time. 

???? Expert tip: Jumbo CDs can be a lucrative way to diversify your investments and protect a portion of your savings, especially if you're nearing retirement age. But they shouldn't be your only investment. Your goal should be a mix of low-risk and higher-risk investments to balance out your portfolio and build enough wealth for retirement.

Alternatives to a jumbo CD

If a jumbo CD doesn't quite fit your financial needs, you have plenty of other options to consider — both alternative CDs and other high-yield options.

• Traditional CD. Traditional CDs typically require lower minimum deposits than jumbo CDs and are a solid choice if you can’t comfortably lock up the $100,000+ required for a jumbo CD — or if you find a traditional CD offering a better interest rate. 

• IRA CD. An IRA CD can offer the same benefits as a traditional CD if you’re saving for retirement, but with the bonus of tax advantages. You can choose between a traditional IRA CD with tax-deferred growth or a Roth IRA CD with tax-free growth and withdrawals.

• High-yield savings account. Today’s high-yield savings accounts can offer higher rates than jumbo CDs with flexible access to your money, no penalty required. But unlike CD rates, the interest rate on an HYSA is variable and can change at any time with the market.

• Money market account. Rates on money market savings accounts are competitive with HYSAs, with limited — though useful — checking and debit privileges.

• Higher-risk investments. You’re likely to average higher returns on stocks, index funds and mutual funds, though with higher potential losses. 

Dig deeper: High-yield savings account vs. CD: What to know when rates are high

Frequently asked questions about jumbo CDs

Learn more about jumbo CDs, high-interest rates and more when comparing your options.

What’s the difference between a jumbo CD and a traditional CD? 

The main difference is the minimum amount of money you’re required to deposit. A jumbo CD typically requires a minimum opening amount of $75,000 to $100,000, compared with traditional CDs, which require minimums of $500 or more. You might earn a slightly higher interest rate on a jumbo CD for agreeing to deposit more money, but rates vary by bank.

Aside from this requirement, jumbo CDs function exactly like regular CDs: You have a fixed term length and interest rate, and you pay a penalty if you need to access your money before the CD matures.

What are jumbo CD rates today? 

The FDIC doesn’t track average jumbo CD rates. But it’s common to see rates as low as 0.05% to as high as 5.20% or more, depending on the bank and term. Currently, some of the highest 12-month jumbo CD rates are around 5.20% from Alliant Credit Union, and the best 10-year jumbo CD rates are around 2.50% from Chase. 

Are jumbo CDs negotiable?

Not usually. The advertised rates you see for jumbo CDs is what you get. There’s little (if any) room for negotiation. However, some banks support relationship rates for existing customers, which are higher than advertised rates for non-customers. 

How risky is a jumbo CD?

Jumbo CDs are very safe because they’re federally insured by the NCUA or FDIC. So even if your bank failed, you would get all your money back, up to the federal limits. The main risk you have to worry about with a jumbo CD is the potential early withdrawal penalties you’ll face if you need your money early. 

Is it better to have one large CD or several smaller ones?

It depends on your budget and financial goals. If you’re not ready to commit to one large CD, you might want to consider a CD ladder, which is where you take out several smaller CDs with different maturity dates, so you have rolling access to your money as each one matures. But if you’re absolutely sure you won’t need your money during the term length you’re considering, a single jumbo CD can help keep things simple.

About the writer

Cassidy Horton is a finance writer who specializes in banking, insurance, lending and paying down debt. Her expertise has been featured in NerdWallet, Forbes Advisor, MarketWatch, CNN Underscored, USA Today, Money, The Balance and Consumer Affairs, among other top financial publications. Cassidy first became interested in personal finance after paying off $18,000 in debt in 10 months of graduation with an MBA. Today, she's committed to empowering people to stand up and take charge of their financial futures.