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When you have hundreds of thousands of dollars at your disposal, your investment options can seem endless. If you’re looking to diversify your portfolio and minimize risk, consider buying a jumbo CD that is insured through a Federal Deposit Insurance Corp. (FDIC) bank or a National Credit Union Administration (NCUA) institution. Also, make sure that the CD is within insurance guidelines.
Here are the top nationally available rates for jumbo CDs. Compare these offers, then calculate how much interest you could earn when your CD comes due.
|SchoolsFirst Federal Credit Union||2.50%||$100,000|
|Suncoast Credit Union||2.45%||$100,000|
|Navy Federal Credit Union||2.35%||$100,000|
|Golden 1 Credit Union||2.00%||$100,000|
|BMO Harris Bank||1.90%||$100,000|
|USAA Federal Savings Bank||1.86%||$95,000|
Note: The APYs (Annual Percentage Yield) shown are as of Feb. 18, 2020. The rates for some products may vary by region.
Jumbo CDs are typically available for savers with at least $100,000 to deposit. In the past, these accounts provided a higher rate of return than traditional CDs. But with interest rates still at the low end of the spectrum, good deals on jumbo CDs can be hard to find.
The best 5-year jumbo CDs pay more than two times the 5-year jumbo CD national average of 1.18 percent APY, according to Bankrate’s most recent national survey of banks and thrifts.
Today’s top jumbo CD pays 2.5 percent APY. This may be a good place to invest if you’re saving money for a big ticket item or a large down payment on a house. Having a jumbo CD can also be helpful if you need collateral for a loan.
SchoolsFirst Federal Credit Union was formed during the Great Depression in 1934. The credit union, created by school employees, has 50 branches.
SchoolsFirst Federal Credit Union has low minimum balances and CD terms from as short as 30 days to as long as five years. The more money you put in your CD, the higher the APY.
Suncoast Credit Union was started in 1934 as Hillsborough County Teachers Credit Union. Suncoast Credit Union now has 69 branches and more than 866,000 members.
Suncoast Credit Union is the eighth largest credit union in the U.S. based on membership. It is also the tenth largest based on assets.
People who attend school, live, work or worship in a county in Florida that Suncoast Credit Union serves are welcome to join.
Navy Federal Credit Union has more than 8.8 million members and is the world’s largest credit union. It has a global network of 340 branches. Navy Federal Credit Union has its headquarters in Vienna, Virginia.
Membership at Navy Federal Credit Union is open to all Department of Defense and Coast Guard Active Duty, civilian, contract personnel, veterans and their families.
In addition to CDs, Navy Federal Credit Union also offers checking and savings accounts, loans and credit cards.
Golden 1 Credit Union has one million members. Its main office is in Sacramento, California and has been around since 1933. Golden 1 Credit Union has 72 branches in California. Membership to Golden 1 Credit Union is open to all Californians.
Non-Californians can join Golden 1 Credit Union if they are a registered domestic partner or family member of an existing member. They can also join if they’re a member of one of the select employee groups.
The credit union changed its name to Golden 1 Credit Union in 1977. It was founded in 1933 as California State Employees’ Credit Union #1.
BMO Harris has both a regional presence and it also offers online accounts. The bank operates more than 500 branches in Arizona, Florida, Illinois, Indiana, Kansas, Minnesota, Missouri and Wisconsin. Its headquarters is located in Chicago.
There is only a $1,000 minimum balance required to open a BMO Harris CD. However, you’ll need to put at least $100,000 into the CD to get this APY.
USAA membership is open to those serving in the U.S. military or those who have received a discharge type of honorable. It is also open to their family members.
USAA, which has its headquarters in San Antonio, Texas, was founded in 1922.
USAA offers checking accounts, savings accounts, credit cards, auto loans, CDs, mortgages, personal loans and other banking products.
CIT Bank is CIT’s national direct bank. CIT Bank, N.A. is a subsidiary of CIT Group Inc.
In addition to its CDs, CIT Bank offers two savings accounts and a money market account. CIT Bank also launched its eChecking account in November 2019.
Here are two benefits of jumbo CDs.
Each depositor at an FDIC-insured bank is insured to at least $250,000 per FDIC-insured bank. At an NCUA institution, the standard share insurance amount is $250,000 per share owner, per insured credit union, for each ownership category.
A jumbo CD refers to the large account opening balance required for these types of CDs. Usually, a jumbo CD has a minimum account opening balance of $100,000, but that isn’t always the minimum amount.
"Some of those … lower minimum deposits on jumbos are a vestige of back when the FDIC insurance limit was $100,000, rather than ($250,000),” says Greg McBride, CFA, Bankrate chief financial analyst. “So a jumbo CD would be issued for $95,000 to leave a little headroom for the interest earnings without breaching the FDIC insurance gap.”
A regular CD may not even have a minimum deposit and could potentially have a higher APY than a jumbo CD.
If you only go as far as your local bank to find CDs, you could be leaving money on the table. That’s why shopping around and comparing rates is key.
Online-only banks typically offer competitive CD yields because they have no branches to maintain. Credit unions often have favorable rates for savers as well. If you focus on the institutions that are federally insured, you’ll be able to reclaim your funds (up to $250,000) even if your bank shuts its doors.
Generally, longer CD terms offer higher yields. If you’re looking for the best jumbo CD rates, start by checking out accounts that mature within five years.
Here are some downsides to consider.
The biggest risk to a jumbo CD is if you put a large amount of money into it – for a long period of time – and that money is not keeping up with inflation. The risk is not that you will lose principal, but that you’ll lose purchasing power if inflation is ahead of the APY you’re earning on the jumbo CD.
Another risk is that if an emergency occurs, you may have to pay an early withdrawal fee to access your money. Those can be severe enough to cause you to lose some of your principal.
A jumbo CD is a good investment if the APY and the time horizon fit your needs. It’s possible to get a CD that isn’t a jumbo CD that has both a lower minimum balance and higher APY. If this is the case, then the jumbo CD is not necessary.
Penalties vary depending on the bank or credit union you choose. At Sun East Federal Credit Union for example, the following penalties apply:
A jumbo CD can be either for short-term or long-term savings. Jumbo refers to the minimum balance needed to open the CD. Since you’re keeping a large amount of money, make sure that you get the best APY possible.
“You'd be surprised how often banks pay the same rate on a jumbo as they do on a much smaller deposit,” McBride says.
So compare jumbo CDs, minimum balance requirements to get a certain APY, the APY that you’ll earn on the CD and the CD term length to make a decision.
Having a jumbo CD could leave you with a giant tax bill. The interest you earn will be taxed as ordinary income.
Calculate your potential tax bite and decide whether you should put part of your money elsewhere. Capital gains are taxed at a lower rate, so investing some of your savings in stocks and other securities could reduce what you owe Uncle Sam.
CDs that generally need to be held by the account holder until they mature are non-negotiable. Generally, jumbo CDs you can purchase at a bank fit this description.
On the other hand, negotiable CDs can be sold to another party, who then has the option to resell the CD, according to the Richmond Federal Reserve. Negotiable CDs are traded in the secondary markets. A brokered CD is an example of a CD that you can sell on the secondary market.
Brokerages and independent salespeople are sometimes able to negotiate a higher rate. This may be possible if they can promise to deliver a specific dollar amount to the financial institution, according to the SEC.
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