Jumbo Interest Rates on CDs Without Jumbo Funds
May 26, 2010
Jumbo deposits--those of $100,000 or more--usually command higher interest rates on CDs. As of the end of April 2010, jumbo CD rates averaged from 0.01% to 0.04% more than conventional CD rates, depending on the CD maturity.
If you're a saver who can't plunk down $100,000 into CDs, you're relegated to lower rates, right? Not so. Actively comparing bank offers can help you find above-average bank rates on any kind of deposit product.
High Interest Rates on CDs Available for Depositors of All Kinds
Smart rate shopping can help you find the equivalent of jumbo rates with relatively modest deposit amounts. Among the most competitive CD rates across all maturity terms, active rate shoppers may now find particularly high rates on 3-year CDs.
To examine the benefits of active rate shopping, MoneyRates.com compared US average CD rates listed by the Federal Deposit Insurance Corporation (FDIC) with the best no-strings-attached rates on MoneyRates.com during the last week of April 2010. ("No strings attached" in this instance means those CD rates most readily available to our readers: no state or local restrictions on where or how the CD is available, deposit minimums of less than $10,000, and no deposit maximums.)
Comparing Interest Rates on CDs of Different Lengths
The following is the amount by which the best no-strings-attached CD rates found on MoneyRates.com exceeded the national average CD rates during the last week of April 2010, by CD maturity term:
- 1-month CD: 0.75%
- 3-month CD: 0.66%
- 6-month CD: 0.89%
- 1-year CD: 1.09%
- 2-year CD: 0.92%
- 3-year CD: 1.21%
- 5-year CD: 1.15%
As you can see, every maturity term shows a positive premium for active rate shopping, but the advantage appears greatest for longer-term CD rates.
Highest Non-Jumbo CD Rates Beat Average Jumbo CD Rates
MoneyRates.com found that the best no-strings-attached rates for non-jumbo CDs--often offered for deposit minimums of less than $10,000--beat national average CD rates for jumbo deposits of comparable maturities. Smart rate shopping on MoneyRates.com can earn you the CD buying power of a large depositor even if you have less to deposit.
Selecting CD Maturity
It's worth noting that this analysis isn't necessarily a recommendation of maturity length for your specific circumstances. CD buyers should evaluate maturity based on a number of factors, including the spread between long-term and short-term CD rates and your own prediction about whether bank rates are likely moving upward or downward during your target time frame.
Additionally, your cash flow pattern may be an important determinant of your CD maturity choices. If the CD funds are earmarked for a specific purpose, you may want a CD that will mature just before you need the money; if you have a lump sum coming to you at a specific point in time, you may want to select a CD that will mature at a similar time, so you can consolidate your funds for your next investment.
Regardless of the CD maturity most appropriate for your circumstances, it is useful to be aware of any above-average premiums which may be available to you via active rate shopping. If you are not targeting a specific maturity, you will want to know which maturity will offer you the highest rates, both compared to otherwise available current rates and on an absolute basis.
