Looking for a fixed, predictable and safe return on your savings? You could benefit from opening a certificate of deposit (CD), and a jumbo CD may be the way to go if you have significant funds to protect.
Over the last few years, CD rates rose as the Federal Reserve sought to fight inflation by raising interest rates. Jumbo CD rates were also increasing, with many accounts offering over 5% on deposits. However, as the Fed ended its rate hiking campaign, the growth of CD and high-yield savings account rates also ended.
In September the Federal Reserve cut the federal funds rate 50 basis points (bps), or 0.50%, to a target range of 4.75% to 5%. CD rates started dropping less than 24 hours after the Fed made its official announcement. For the second meeting in a row, the Federal Reserve dropped the federal funds rate by 25 basis points, to a target range of 4.5% to 4.75% at their November meeting.
For this reason, make sure to lock in rates ASAP, while they're still fairly high. You can use our tool below to compare today's CD rates.
What is a jumbo CD?
Depending on how much cash you're looking to invest, you could be eligible to open a jumbo CD account. A jumbo CD account is practically the same as a regular CD account, with one main difference — jumbo CD accounts require a higher minimum deposit to open. Typically, most banks require a deposit of $100,000, but this number varies from bank to bank.
How do you find the best jumbo CD rates?
To find the best jumbo CD rate, you need to follow a few steps, including choosing the right bank and deciding what factors work best for you.
- Choose an online bank: Typically, online banks offer more competitive rates than those found at traditional banks. For this reason, you’ll likely have to forgo a brick-and-mortar bank for an online one if you’re looking to open one of the top-earning CD accounts available.
- Make sure your cash is secure: Make sure your account is FDIC or NCUA insured, so your money stays safe even if your bank or credit union fails. The FDIC protects up to $250,000 in individual deposit accounts, and the NCUA protects up to $250,000 per credit union member.
- Compare APY across accounts: While many jumbo CD accounts offer impressive rates, you could potentially find higher yields among other CD accounts, with varying deposit requirements and term lengths.
- Choose the right term: If you withdraw funds from your CD account before the term is through, you'll likely be charged a withdrawal fee that can offset any interest you’ve earned on your savings (unless you have a no-penalty CD). Therefore, when choosing an account, make sure you won't have to access your cash until the CD matures.
Here are some of the top-earning jumbo CD accounts available for a range of term lengths.
Connexus Credit Union
APY: 3.52%
Term: 12 months
Minimum balance: $100,000
Justice Federal Credit Union
APY: 4.75%
Term: 6 months
Minimum balance: $100,000
My eBanc
APY: 5.00%
Term: 6 months
Minimum balance: $50,000
State Department Federal Credit Union
APY: 4.58%
Term: 12 months
Minimum balance: $100,000
Alliant Credit Union
APY: 3.10%
Term: 6 months
Minimum balance: $75,000
Finworth
APY: 4.55%
Term: 12 months
Minimum balance: $50,000
ECFU Financial
APY: 4.45%
Term: 6 and 12 months
Minimum balance: $100,000
State Bank of Texas
APY: 4.25%
Term: 12 months
Minimum balance: $50,000
Bottom line on jumbo CD rates
While jumbo CD accounts require much higher deposits than standard CD accounts, in many cases they also offer a higher APY. Because they offer some of the highest saving rates on the market, jumbo CD accounts are a good option for individuals who want to earn a guaranteed rate of return on their savings — without the risk. Although CD accounts offer comparatively lower returns compared to higher-risk investment options, like stocks or ETFs, they’re a better choice if you’re looking for a fixed, predictable and safe return on your money.
Before opening a jumbo CD account — and locking up at least $25,000 for an extended period of time — take into consideration when you’ll need access to your cash. You don’t want to be hit with hefty withdrawal fees for accessing your cash before the maturity date on the account. For this reason, CDs aren't good options for savings you could potentially need quick access to, like an emergency fund.
If you decide that a jumbo CD is, in fact, the right savings vehicle for your hard-earned cash, lock in rates before they drop even more.
