Dear Dr. Don,

With the FDIC insurance limit now permanently at $250,000, will the definition of jumbo CDs (and jumbo CD pricing) change from CDs with balances of $100,000 and greater to those that are $250,000 and greater?

— Jim Juxtaposition

Dear Jim,

An interesting question. Prior to the financial meltdown, FDIC insurance limits had been at $100,000 per depositor since 1980, when it was raised from $40,000. I don’t remember jumbo CDs being defined as $40,000-plus back in 1979, but I was barely out of college and wasn’t really a consumer of jumbo CDs back then.

While I’ve always thought, as you do, that jumbo CDs are deposits over $100,000, at least two financial dictionaries define them as deposits of over $1 million. That said, it’s far more typical for them to be defined as deposits of $100,000-plus.

Jumbo CDs are typically negotiable CDs, meaning their value will fluctuate over time with changes in market interest rates, but they will pay the face value at maturity plus interest. I don’t see the bar being raised to $250,000, but there’s not a lot of downside if that does happen.

The upside is the jumbo CD typically provides its investor with a yield pickup over a nonjumbo CD. If the jumbo CD investor can realize that yield pickup in a fully FDIC-insured investment, then so much the better.

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