What are the differences between a jumbo CD and a regular CD?


Quick Answer

The minimum deposit amount and the rate of interest are the primary differences between a jumbo CD and a regular CD. A jumbo CD typically requires a minimum investment of $100,000, while individuals can invest lower amounts of money in a regular CD. Jumbo CDs also feature higher interest rates.

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Full Answer

Certificates of deposits, known as CDs, are low-risk investments in which individuals deposit money for a specified time period for a given rate of return. Normally, the longer the term of the CD, the higher the interest rate. Banks reward depositors who invest $100,000 or more in a CD by offering a higher interest rate than they offer those who invest smaller amounts of money.

Financial experts consider regular and jumbo CDs to be safe and stable investments. Jumbo CDs are a bit riskier because for larger CDs, the entire investment may not be covered by the Federal Deposit Insurance Corporation. FDIC insurance covers each account holder's deposits up to $250,000 per financial institution, as of April 2015. If an individual has any combination of deposits, including regular CDs, jumbo CDs, checking accounts and savings accounts, with an aggregate total of more than $250,000, the FDIC does not cover the amount in excess of the $250,000 in the event of a bank failure.

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