A Jumbo CD (Certificate of Deposit) requires a minimum deposit of $100,000. In all other respects, a jumbo CD is no different than any other CD.
How do Jumbo CD Rates compare to CDs with lower minimum deposits?
Jumbo CDs have a reputation for providing some of the highest CD rates. On a basic level this makes sense. If you were a bank would you prefer to gather $100,000 from 10 clients or from 1 client. Serving one client would seem to be more efficient than serving 10. However, over the last few years, banks have not needed to gather much money from depositors and have provided little incentive to put in larger deposits. When interest rates start rising, Jumbo CDs may again offer higher rates.
Do Jumbo CDs have less FDIC insurance?
The FDIC offers $250,000 of insurance per depositor, per bank. Many years ago, the FDIC only offered $100,000 of insurance per acount which meant that any Jumbo CD that had more than the minimum deposit wasn’t fully covered by FDIC insurance.
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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.