Jumbo CDs work the same way as regular CDs but with larger minimum deposit amounts. Jumbo CDs are often purchased by institutional investors with large sums of money to manage and need to put money into safe investments like CDs to protect their investors against risks.
Jumbo CD rates can be slightly better than regular CD rates, such as 0.05% or 0.10% higher, but these CDs have a high opening minimum: usually around $100,000.
Jumbo CDs are considered risk-free investments, as they're insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC).
Jumbo CDs are much like regular CDs, except that they require a larger deposit, pay higher rates of interest, and can come in shorter and longer term lengths.
There aren't any traditional banks offering a 7% interest savings account in the U.S., but you will find some credit unions that offer checking accounts and certificates with rates near or above 7.00% APY. It's important to note that savings account rates are variable and can change at any time.
You can get 6% on a CD by becoming a member of a credit union offering a certificate with this rate.
Advantages of Jumbo CDs
Jumbo CDs are FDIC insured up to $250,000 per depositor for each ownership category in the event of a bank failure. If you want the government-backed guarantee of never losing your deposits, jumbo CDs can offer this safety. Steady yields. Jumbo CDs offer fixed-rate APYs, just as regular CDs do.
Open your CD as part of a retirement account
So, your income taxes will be deferred until you tap into your IRA in retirement. If you opt for a Roth IRA, your money grows tax-free. You do pay income taxes on the money you open the IRA with, but you won't pay income taxes on its growth.
Minimum and maximum amounts for CD investments
You can expect a minimum CD opening deposit of at least $500 at most banks, though that could rise to $2,500 or more for certain accounts. For example, CIT's Jumbo CDs require a minimum balance of $100,000. CDs with higher minimums often pay higher APYs.
You won't get rich investing in CDs, but if you're looking for a place to park funds for a specific period, and you value a guaranteed rate of return, a CD is worth considering — just keep these tips in mind.
You must report interest earned on a CD as taxable interest on Form 1040.The bank issuing the CD will send you an annual information return, Form 1099-INT and/or Form 1099-OID, that reports the taxable interest income for the year in Box 1. The interest amount should be reported on line 2 b on your Form 1040.
The national average rate for one-year CD rates will be at 1.15 percent APY by the end of 2024, McBride forecasts, while predicting top-yielding one-year CDs to pay a significantly higher rate of 4.25 percent APY at that time.
Inflation Risk
If inflation is rising, it could outpace the rate of return you're earning on your CDs, especially in a low interest rate environment. This means even though your savings is growing, it won't stretch as far when it's time to spend it.
Having multiple CDs can be a great way to diversify your portfolio without sacrificing as much liquidity. Risk is low, and CDs provide steady returns. Just know that owning too many CDs could cut you off from other high-return investments. Investing is one part of the financial journey.
Why it's probably time to buy a CD. It's unlikely that CD rates will continue to climb any higher. Now, you can lock in high rates on both short-term and long-term CDs. Waiting to open a CD could mean missing out on some stellar rates.
The average yield on a one-year CD in December 2023 was 1.86%, according to the Federal Deposit Insurance Corporation (FDIC), while a 60-month CD was 1.40%. While those rates aren't exactly robust, they're well above recent levels.
Minimum deposits for jumbo CDs are usually around $100,000. While you must meet the minimum deposit to open a CD account and earn interest, you can always exceed the minimum deposit.
Among scheduled private sector banks, DCB Bank and RBL Bank offer the best FD interest rates of up to 8.00% p.a. Among scheduled public sector banks, the highest FD rate is offered by the Punjab & Sind Bank of up to 7.40% p.a. for a tenure of 444 days.
As of February 2024, no banks are offering 7% interest rates on savings accounts. Two credit unions have high-interest checking accounts. Eligibility for these credit unions is limited according to geographic location and other narrow criteria.