Here’s a riddle: What can be mini and jumbo at the same time? The answer is a mini-jumbo CD.
Surprised that such a thing exists? Now you know. Some banks offer jumbo-sized CD rates for a fraction of the deposit required for a jumbo CD.
A mini-jumbo CD is basically just marketing hype. It can be a deposit of any size determined by the bank, says Dan Geller, Ph.D., executive vice president of Market Rates Insight, a pricing consultant to the financial services industry.
Though the standard jumbo CD requires a deposit of about $100,000, “I’ve seen ads for mini-jumbo CDs for a $20,000 deposit,” Geller says.
How to find the best mini-jumbo CD rates
Finding the best mini-jumbo CD rates is not rocket science, but it will require a computer and an Internet connection.
Start your search online, looking at rates at local, national and online-only banks.
If you have multiple accounts at a local bank or credit union, check with it as well. Be sure to ask in person, referencing your long and ongoing relationship with the institution, and ask if there are any deals for current customers. It never hurts to ask.
Remember, longer-term CDs typically have higher interest rates, but there’s a catch: “The 2 primary considerations in selecting fixed instruments are interest rates and liquidity, and instruments typically trade one for the other,” says Rob Drury, executive director of the Association of Christian Financial Advisors.
Breaking a CD early typically incurs a penalty fee levied by the bank. A particularly punishing early withdrawal penalty can wipe out all of the interest earned and even eat into principal. Be aware of the penalty for early withdrawal if you’re locking up cash for several years.