What Is a Jumbo CD? - NerdWallet (2024)

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What is considered a Jumbo CD? ›

A jumbo CD is a certificate of deposit — a type of savings account — that usually requires $100,000 to open.

You might be reluctant to put your money in high-risk investments, like stocks. However, for potentially higher returns over a longer period, a certificate of deposit (CD) could be a great place to put your $50,000.

How much interest would you make on a $5,000 CD? We estimate that a $5,000 CD deposit can make roughly $25 to $275 in interest after one year. In comparison, a $10,000 CD deposit makes around $50 to $550 in interest after a year, depending on the bank.

For example, if you deposit $500 in a five-year CD that earns a 5.15% APY, your balance by the end of five years will be $642.71, earning you $142.71 in interest. However, if the interest rate is 3.25%, your earnings will only be $586.71, a difference of $56 in interest earnings.

Jumbo CDs carry with them minimal risk, as they are insured by the Federal Deposit Insurance Corp (FDIC). The largest risk the individual purchasing the jumbo CD carries is that their investment does not accrue enough interest to keep up with inflation.

Credit One Bank, Alliant Credit Union, State Department Federal Credit Union, Quorum Federal Credit Union and Rising Bank offer the best jumbo CD rates. Key Takeaways: The highest jumbo CD rates are up to 5.41% APY from online banks and credit unions.

The biggest risk to CD accounts is usually an interest-rate risk, as federal rate cuts could lead banks to pay out less to savers. 7 Bank failure is also a risk, though this is a rarity.

If you don't need access to your money right away, a CD might be a good savings tool for you in 2024 while average interest rates remain high. CD interest rates are high in 2024 — higher nationally, on average, than they've been in more than a decade, according to Forbes Advisor.

If you put $20,000 into a 5-year CD with an interest rate of 4.60%, you'd end the 5-year CD term with $5,043.12 in interest, for a total balance of $25,043.12.

Can you get 6% on a CD? ›

Finding reliable 6% CD rates

You can find 6% CD rates at a few financial institutions, but chances are those rates are only available on CDs with maturities of 12 months or less. Financial institutions offer high rates to compete for business, but they don't want to pay customers ultra-high rates over many years.

For context, in 2021, when rates were around their lowest, the national average 12-month CD had an APY of just 0.15%. For a $5,000 deposit, this is the difference between earning $250 in interest over a year versus earning only $7.50 over that same time frame.

Unlike stocks or cryptocurrencies, which present a risk of loss, CDs are generally considered safe investment vehicles that do not lose money.

The risk of having a CD is very low. Unlike how the stock market or a Roth IRA can lose money, you typically cannot lose money in a CD.

Key takeaways. Interest earned on CDs is considered taxable income by the IRS, regardless of whether the money is received in cash or reinvested. Interest earned on CDs with terms longer than one year must be reported and taxed every year, even if the CD cannot be cashed in until maturity.

CDs have a typical minimum balance or opening requirement that's often around $1,000, but it can range from $0 to $10,000. There are jumbo CDs with minimums traditionally around $100,000, though these CDs don't necessarily have the best rates in the industry.

That understood, here's what the account will earn based off of some common 6-month CDs rates available online now: 5.35%: $264.01 in interest for a total amount of $10,264.01 after six months. 5.30%: $261.58 in interest for a total amount of $10,261.58 after six months.

A negotiable certificate of deposit (NCD), also known as a jumbo CD, is a certificate of deposit (CD) with a minimum face value of $100,000—though NCDs are typically $1 million or more.

However, federally insured banks and credit unions only insure up to $250,000 per depositor per account ownership category. If you put more than this amount in a single CD, some of your money will be at risk. You can still safely invest more than $250,000 in CDs by opening accounts at multiple financial institutions.