Q: I’ve heard some friends talking about jumbo CDs. I have some money invested in CDs, but I’ve never heard of jumbo CDs. What are they?

A: A jumbo CD is exactly what it sounds like: a really big certificate of deposit. Specifically, a CD with a minimum deposit of $100,000 or more.

Like all CDs, jumbos offer higher interest rates than typical bank savings accounts. In exchange, you agree to leave your deposit in the account for a particular period of time — anywhere from 30 days to several years. Typically, interest rates go up with longer holding periods.

Traditionally, jumbo CDs paid a higher interest rate than CDs with lower minimum deposits. As with all CDs, however, rates are set by individual institutions, and a minimum deposit does not guarantee the highest rate available for a particular term. With all CDs, shop around to find the best rate and terms.

Due to the large minimum deposit, the major purchasers of jumbo CDs are institutional investors: banks, pension funds and large companies who need a stable place to park cash. They may be a good idea for individuals if you receive a large sum of money (you sell your home or business, for example) and want to earn a little interest until you’re ready to invest again.

As of January, 2011, the FDIC insures up to $250,000 of deposits per person, per institution, and jumbo CDs are eligible for the full amount. Be aware that other deposits you hold at the same bank — either on your own or with another person — count toward your $250,000 total.