Editor’s note, March 23, 2020: Many banks and credit unions are temporarily waiving early withdrawal penalties for CDs in response to widespread financial distress caused by the coronavirus situation. To find out if your bank or credit union is one of them, call its customer service line.
Certificates of deposit, unlike regular savings accounts, keep your funds under lock and key for a specified term. And banks give a good incentive not to tinker with the lock: Withdrawing before the CD term’s end generally costs you.
What is an early withdrawal penalty?
A CD’s early withdrawal penalty is trickier to figure out than other bank fees because you’re not typically looking at a fixed dollar amount or percentage. Instead, the penalty is interest the CD earned (or would have earned) over a number of days or months.
This penalty varies by bank and even by the term of a CD at the same bank. A five-year CD might have a higher penalty than a one-year CD. And, if you withdraw early enough, a penalty might include part of the money you put in, meaning you can lose money on a CD.
See what an early withdrawal can cost using our calculator, with help from a list of penalties at some banks and credit unions below.
» Withdrawing early to find a better CD rate? See the best CD rates for this month
No-penalty CDs: the big exception
Early withdrawal penalties are standard, but some CDs let you withdraw virtually at any time for free. These no-penalty CDs don’t have the highest rates, but you can find yields comparable to high-yield savings accounts. The big plus over savings accounts? Your rate is locked in. (See more details about the best no-penalty CDs.)
Compare 3 no-penalty CDs at online banks
CD early withdrawal penalties
|Alliant Credit Union*|
|American Express Bank|
|Bank of America|
|Connexus Credit Union|
|Marcus by Goldman Sachs|
|Navy Federal Credit Union*|
|Pentagon Federal Credit Union**|
The CD early withdrawal penalty calculator assumes three things:
- The penalty is in terms of simple interest. This means that the penalty doesn’t factor in compounding, which aligns with how many banks compute a penalty.
- CD interest, outside the penalty, is compounded daily, which is typical for online high-yield CDs. If your CD is compounded monthly, results may differ slightly. For example, the result may be off by several dollars for six-figure deposits.
- There are no partial withdrawals for CDs. Although some banks allow this, many don’t, so our calculator follows suit. If your bank lets you withdraw part of your CD early, the penalty tends to be for the withdrawn amount instead of the full CD balance at the time of withdrawal.