Large-denomination certificates of deposit have always been a popular product, primarily because their returns are significantly higher than those of ordinary deposits. However, large-denomination CDs are not suitable for everyone, and there are four main reasons why some people may not be suitable for them:

Reason One: Low Returns

At this point, someone might question, didn't you just say that the returns on large-denomination CDs are high? How can they be low now?

What we are referring to here is a relative value of returns. Indeed, when they were first introduced, the interest rates on large-denomination CDs could easily outperform many similar products, making many high-yielding financial products at the time bow down in comparison.

However, as interest rates have continued to decline over the years, and regulatory authorities adjusted the interest rates on large-denomination CDs last year, the rates have fallen further. Taking a three-year large-denomination CD as an example, the rate has gradually dropped from an initial high of 4.125% to the current 3.35%, with some joint-stock banks only able to offer up to 3.55%.

Compared to many related products offered by banks today, this interest rate level does not have an advantage, and in fact, many exclusive products, innovative products, and government bonds have higher interest rates than large-denomination CDs. Therefore, large-denomination CDs are not the only choice anymore.

Reason Two: High Threshold

This is even easier to understand. It's important to recognize that one of the most obvious characteristics of large-denomination CDs is their high threshold for purchase. Individuals must have a minimum of 200,000 to purchase, and some products may require half a million to several million; while for corporate purchases, the starting point is 10 million. Clearly, such a high threshold is not achievable for everyone.Some individuals, in order to meet the minimum deposit amount for large-denomination certificates of deposit, even go so far as to consolidate multiple term deposits and may have to withdraw them prematurely. However, doing so may not necessarily be more cost-effective in terms of overall returns, so everyone should carefully consider their options.

Reason Three: Poor Flexibility

We all know that despite its name, a large-denomination certificate of deposit is also a type of term product, possessing all the characteristics of a term deposit, and of course, it also adheres to the requirement that the interest rate for early repayment will be based on the demand deposit rate.

Since the policy of interest calculation based on the remaining term was abolished, the disadvantage of poor liquidity in term deposits has been blatantly exposed, especially for the relatively high-yielding 3-year products. It is best not to have the need to withdraw them prematurely after processing, because once withdrawn early, the loss of interest income can be substantial.

Reason Four: Limited Quotas

The issuance of large-denomination certificates of deposit is different from that of ordinary term products. Before issuance, a plan must be reported to the People's Bank of China, and a series of procedures must be completed before they can be issued and listed. Therefore, both the issuance time and the quota have strict requirements.

In recent years, as large-denomination certificates of deposit have gradually become more popular, the demand for them has also increased. As a result, there is often an embarrassing situation where the quota is insufficient.

At this point, a problem arises. If large-denomination certificates of deposit are always hard to secure, then the funds in our hands can only "sleep" in the card, and the returns can only be calculated based on the demand rate. In this case, it is very uneconomical. It would be better to choose other deposit products to avoid reducing the returns.So as the market continues to evolve, the once highly sought-after large-amount certificates of deposit have also gradually revealed some practical issues. When we engage in investment and financial management, we should view problems with a developmental perspective. While accurately grasping the latest market trends, we must also continuously learn about the characteristics of various products, enabling the limited funds in our hands to generate higher returns.

Have you ever dealt with large-amount certificates of deposit? What do you think of this product?

Everyone is welcome to leave comments and discuss together.