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If there’s a golden rule to certificates of deposit, it’s this: Don’t withdraw before a CD term ends; otherwise, you pay a penalty.
But sometimes breaking this rule pays off. Getting a CD when rates are low and breaking it when rates are high, for example, might be an opportunity to benefit from a higher-rate CD and earn you more than you would gain otherwise.
Member FDIC
E*TRADE Certificate of Deposit 
APY
4.05%
Term
6 months
Member FDIC
Synchrony Bank CD 
APY
4.00%
Term
13 months
Member FDIC
Bread Savings® CD 
APY
4.15%
Term
9 months
If you want to break your CD, check the math to see what you lose on an existing CD and what you gain on a new CD or other investment. Online calculators may help. Now let’s dive in.
3 steps to see if changing CDs is worth it
Let’s assume that a CD is generally working for you. (We’ll discuss other investment options later.) You put an upfront amount of money into a CD and won’t need to withdraw until the term ends months or years from now. You have a guaranteed rate of return since a CD usually has a fixed rate.
But in a rising-rate environment or if your CD yield’s lower than similar-term CDs elsewhere, a CD’s fixed rate has a downside: You miss out on newer or other CDs that have higher rates.
Let’s see if you should withdraw from your CD early and get a new one.
1. Calculate what you would lose from breaking your current CD
There are typically two costs to a CD’s early withdrawal: a bank’s penalty and the amount of remaining interest you would’ve earned had you kept that CD until maturity. Use this early withdrawal penalty calculator to get both costs and add them up.
Example
You put $10,000 into a CD with a five-year term and a 1% annual percentage yield. If you hold the CD until maturity, the total amount you can earn is $510 in interest. But instead, you withdraw when there’s one year left. Your bank charges a penalty that’s equal to, say, one year of simple interest.
The penalty would be about $100 and the total future interest forfeited (the last year’s worth) is about $100, when slightly rounded. Combined, you lose about $200.
Your total balance upon withdrawal, including your initial deposit, is $10,310 (compared to the $10,510 you would’ve gotten for a full term).
» Learn more: APY vs interest rate explainer
2. Calculate the future earnings from a new CD
Find a CD with a higher rate and see what interest you would gain, assuming you hold the CD for the full term. Use a CD calculator to help.
🤓 Nerdy Tip
You can find the best CD rates at online banks and credit unions. Example
Building off of the same scenario as before, place your withdrawn balance of $10,310 into a new five-year CD that has a rate of 4%. The total interest you’d gain in five years, after minor rounding, is $2,230. Your future balance would end up being roughly $12,540.
3. Take the difference between new CD gains and the first CD’s losses
Subtract the total interest you would earn from the new CD and the total cost you would pay from the old CD. The cost you would pay from the old CD includes both the early withdrawal penalty and the future interest lost:
New CD interest - old CD losses (which includes the penalty + future interest lost)
- If the result is positive, you would benefit from breaking the first CD early. You would recoup the loss and earn more money from the second CD.
- If the result is negative, hold onto the first CD until maturity to avoid losing more money than you’d gain.
Recap of the example
$2,230 (new CD interest) - $200 (loss from old CD) = $2,030 (gain from switching to new CD)
Note: While this scenario assumes you’d find the same term length as the previous CD, you may consider a new CD with a shorter term. A higher-yielding but shorter-term CD might still be a better deal than the CD you have.
What else to consider
Comparing the returns of two CDs can be straightforward because CDs generally have fixed rates. (The exceptions are step-up and bump-up CDs.) You can calculate future gains with high confidence. In contrast, returns from the stock market fluctuate widely, and even rates on regular savings accounts are subject to changes over time.
Bonds, on the other hand, can have fixed interest rates, so you can compare the returns of CDs with some types of bonds, such as Treasury bonds or notes. However, bonds are different enough from CDs that they form a separate part of your overall savings and investment portfolio and may factor into savings goals differently than CDs do. Learn more about how much money to put into CDs.
Note that a CD is for a dedicated sum of money that’s not part of your everyday savings or long-term investments. A high-yield savings account is a better place for an emergency fund, which can consist of several months’ worth of living expenses. For the short- to mid-term savings goals, though, CDs can provide a boost with rates often higher than other types of bank accounts have.
A previous version of this article misstated in the example the amount of the CD’s total future interest forfeited. The amount is about $100, when rounded. This article has been corrected.
See CD rates by term and type
Compare the best rates for various CD terms and types:
How do CDs work?
Learn more about choosing CDs, understanding CD rates, and opening and closing CDs.
Understanding CD rates:
Choosing CDs
Opening CDs
Closing CDs
See CD rates by bank
Here’s a quick list of CD rates at traditional and online banks and a brokerage:
