Advertising Disclosure
  1. Home
  2. Community
  3. Ask
  4. Jumbo Accounts

Jumbo Accounts

happyharold4
  |     |   388 posts since 2022

Can someone help by explaining the logic of offering a way lower APY for jumbo accounts vs other cd's. They are getting a ton more new $$ in with a jumbo, so it doesn't make sense to me. Same with IRA's. They are usually large amounts that will be long term but often get lower APY's. Thanks

  Post an answer
2


Answers
MAKNYC
  |     |   323 posts since 2015
Can suggest many reasons why this atypical setup would exist. Given that CDs pay a premium rate to demand deposits, those funds are an inherently less profitable funding source, and that’s especially true right now given that the majority if FI’s, Fed watchers, and investors are concluding the central bank is either lying or delusional concerning the future path of rates. No FI wants to get stuck with those longer term, high rate deposits when that happens. The reason to offer a premium on the lower threshold accounts is the opportunity to upsell more profitable products/relationships (checking/savings/investment services/direct deposits/credit cards/loans) to more people, and those smaller deposit people are probably even more likely to buy such. Perhaps also those larger investors are less likely to yield chase (despite what you might deduce from this board) and would be amenable to a lower return given the economies of scale to them for moving the money in bulk. Think about all the depositors at any money center bank that are still even today willing to accept .01-.03% on their deposits. So far those banks haven’t lost enough deposits to justify paying market rates, so people with major money in banks don’t seem anxious to debate earning .10-.20 less on a jumbo certificate if many of them are willing to forgo the 3.50% differential available to them by going to any non-money center bank for even a traditional savings vehicle.

In a nutshell my view (without having details on the FI) is more evidence that the rate setting committee at the institution is of the view this cycle has run its course and they are managing their book as such.
Reply
5
happyharold4
  |     |   388 posts since 2022
That helps. Thanks for taking the time to try and explain. What you offered makes good sense.
Reply
2


The financial institution, product, and APY (Annual Percentage Yield) data displayed on this website is gathered from various sources and may not reflect all of the offers available in your region. Although we strive to provide the most accurate data possible, we cannot guarantee its accuracy. The content displayed is for general information purposes only; always verify account details and availability with the financial institution before opening an account. Contact [email protected] to report inaccurate info or to request offers be included in this website. We are not affiliated with the financial institutions included in this website.