Some investors are completely familiar with regular certificate of deposit accounts but have never heard of jumbo CD accounts. Jumbo CD accounts are very similar to standard certificate of deposit accounts but the initial deposit to begin a jumbo CD account differs greatly than a regular certificate of deposit startup principal. The term jumbo actually infers that the initial investment in the account is considerably large.
Jumbo CD accounts are usually associated with fairly nice interest rates that are compounded monthly and there are some Jumbo CD accounts that are accompanied by quarterly interest. If an investor is looking to make the most money they can on Jumbo CD accounts, they are going to want to go with the account that compounds interest often.
The initial deposit for CDs is typically no less that 100,000 dollars. Investors looking to secure their money in a low risk investment prefer the Jumbo CD over other forms of investments like money market funds or stocks which can prove to be quite volatile. Like the standard certificate of deposit accounts, Jumbo CD accounts require that the principal investment remain in the account for a predefined period, also known as the term of the CD. The term of the CD varies, depending upon the lending institution and the choice made by the investor.
Jumbo CD accounts are not FDIC insured by the Federal Deposit Insurance Corporation because the corporation only covers deposits up to 100,000 dollars. Thus, standard CDs are covered by the FDIC, and offer an investor a lower investment risk than a Jumbo CD; this fact should be taken into account before the investment is made. Finally, another consideration that an investor must make before investing in Jumbo CD accounts is that such accounts cannot be as conveniently liquidated as other accounts: penalties may apply for early withdrawal.