Jumbo CD Rates Defined

Although most people have heard of Jumbo CD rates of return, few really understand what this type of CD is and why they are so different from other certificates of deposit.  In this article, we wanted to provide some helpful information so any questions regarding Jumbo CDs and their rates of return are explained.  When these CDs are purchased and used properly, they can be highly beneficial but if not, they could be a waste of time and money.[br]

Although most people have heard of Jumbo CD rates of return, few really understand what this type of CD is and why they are so different from other certificates of deposit.  In this article, we wanted to provide some helpful information so any questions regarding Jumbo CDs and their rates of return are explained.  When these CDs are purchased and used properly, they can be highly beneficial but if not, they could be a waste of time and money.[br]

For starters, a Jumbo CD is a type of certificate of deposit but one that is in a large denomination.  For instance, just as the name implies, these CDs are usually $100,000 or more.  Sometimes, Jumbo CDs are known as “negotiable certificates of deposit” and without doubt, they are a serious investment although most experts consider them as a low risk CD.  The great thing is that for big-time investors, Jumbo CD rates of return are actually considered stable.

Although not everyone can invest at this level, for those who can, these CDs make perfect sense.  When looking at a Jumbo CD, they have the same concept of you would find with a standard type of CD except with lower risk and better payout.  However, these certificates of deposit are thought of as “time deposits” because the investor’s principal is locked up for a short amount of time, generally three months to six years.  Then at the end of that period, the Jumbo CD rates of return are typically outstanding.

Of course, standard CDs are insured by the FDIC, which means the return on principal would also be guaranteed.  The one thing to remember is that insurance through the FDIC for any certificate of deposits only covers up to $100,000.  Unfortunately, because the investment for Jumbo CDs start at $100,000, this means the actual certificate of deposit and any Jumbo CD rates of return would not have the same insurance through the FDIC.[br]

Even though the Jumbo CD is not FDIC insured, it does have an advantage over other certificates of deposit in that the potential for return is much greater.  This means regardless of the Jumbo CD rates of return, the amount earned would be directly linked to the time the principal is locked up.  Therefore, if the CD takes a long time to reach maturity, Jumbo CD rates of return are going to be much better.  Let us say you had a standard six-year certificate of deposit with a high interest rate that was the identical amount of principal in the Jumbo CD locked up for six months.  Because of the very nature, Jumbo CD rates of return would be far better than you would get on the smaller CD once it hits maturity.

Another benefit is that Jumbo CD rates of return are typically much higher than you would see from certificates of deposits sold for smaller denominations.  In fact, Jumbo CDs are a better investment compared to a regular bank or credit union savings account or money market account.  Remember, the longer it takes a Jumbo CD to mature the more money it earns.  Therefore, while it seems a long time to have the principal locked up for six years, the Jumbo CD rates of return would be worth the wait.

Another important thing to know about these CDs and Jumbo CD rates of returns is that for the higher amount of money earned, other savings would not have to be liquefied.  Additionally, if you were to decide to take some or all the principal out prior to the maturity date, you would face two consequences.  First, you would be required to pay a penalty fee and second, you would actually forfeit a portion of the Jumbo CD rates of return.

Find out more about Jumbo CD Bank Rates.