No Penalty CD Rates
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Tired of early withdrawal penalties? Try No-Penalty CDs. See who has the top rates today.
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- CIT Bank No Penalty CD:
4.90% APY - Ponce Bank:
4-Month No Penalty CD - 5.30% APY - mph.bank:
6-Month No-Penalty CD - 5.20% APY - First Mid Bank & Trust:
9-Month No-Penalty CD - 5.00% APY - American First Credit Union:
3-Month No-Penalty CD - 4.90% APY - Sallie Mae Bank:
14-Month No Penalty CD - 4.75% APY - Synchrony Bank:
11-Month No-Penalty CD - 4.50% APY - Technology Credit Union:
5-Month No Penalty CD - 5.36% APY - Mission Valley Bank:
3-Month No-Penalty CD - 5.35% APY - Blue Federal Credit Union:
9-Month No Penalty CD - 5.10% APY
Imagine needing money for urgent car repairs or medical needs. But, your funds are locked away in a CD and you need to pay some hefty fees to withdraw early.
Luckily, no-penalty CDs exist. They allow you to make an early withdrawal without incurring any charges.
Check out the best no-penalty CD rates and see whether this is the right investment for you.
CIT Bank No Penalty CD - 4.90% APY
- 4.90% APY
- Option to withdraw full balance and interest after 7 days of CD funding date
- $1,000 minimum to open an account
- 11 months
- No monthly maintenance fee
- Member FDIC
mph.bank: 6-Month No-Penalty CD - 5.20% APY
- No fees
- $1 minimum deposit
- 24/7 online access to funds
- FDIC insured
First Mid Bank & Trust: 9-Month No-Penalty CD - 5.00% APY
- $1 minimum deposit
- No fees
- 24/7 online access to funds
- FDIC insured
American First Credit Union: 3-Month No-Penalty CD - 4.90% APY
- $1 minimum deposit
- No fees
- 24/7 online access to funds
- Federally insured by NCUA
Technology Credit Union: 5-Month No Penalty CD - 5.36% APY
- $1 minimum deposit
- No fees
- Deposits federally insured up to at least $250,000 by NCUA
Mission Valley Bank: 3-Month No-Penalty CD - 5.35% APY
- $1 minimum deposit
- No fees
- 24/7 online access to funds
- FDIC insured
Blue Federal Credit Union: 9-Month No Penalty CD - 5.10% APY
- No fees
- $1 minimum deposit
- 24/7 online access to funds
- Federally insured by NCUA
What is a No-Penalty CD?
A no-penalty certificate of deposit (CD) works like a regular CD where you keep a fixed amount of money for a fixed term in exchange for a fixed rate. Except, for no-penalty CDs, you can take out your money before maturity without worrying about paying early withdrawal penalties.
A no-penalty CD can give you the flexibility to pivot your money when and where you need it to be. But, they are quite rare, so not all banks or credit unions may offer this option.
Technically, you can withdraw your CD before maturity but there may be applicable penalties. When getting a CD, you want to leave it alone to maximize your earnings. Otherwise, consider more flexible options like high-yield savings accounts.
How Much Does a No-Penalty CD Pay?
If you had $1,000 in a no-penalty CD with 2.5% APY, you could earn $25 in one year. To earn decent interest, you want to get the highest APY available on a no-penalty CD. If you have the extra money, you can open a no-penalty CD with a higher deposit.
Here's a table to illustrate how much interest you can earn on a no-penalty CD with different APY and deposit amounts.
| APY | $1,000 | $2,000 | $5,000 | $10,000 |
|---|---|---|---|---|
| 0.00% | $1,000 | $2,000 | $5,000 | $10,000 |
| 0.50% | $1,005 | $2,010 | $5,025 | $10,050 |
| 1.00% | $1,010 | $2,020 | $5,050 | $10,100 |
| 1.50% | $1,015 | $2,030 | $5,075 | $10,150 |
| 2.00% | $1,020 | $2,040 | $5,100 | $10,200 |
| 2.50% | $1,025 | $2,050 | $5,125 | $10,250 |
| 3.00% | $1,030 | $2,060 | $5,150 | $10,300 |
| 3.50% | $1,035 | $2,070 | $5,175 | $10,350 |
| 4.00% | $1,040 | $2,080 | $5,200 | $10,400 |
| 4.50% | $1,045 | $2,090 | $5,225 | $10,450 |
| 5.00% | $1,050 | $2,100 | $5,250 | $10,500 |
| 5.50% | $1,055 | $2,110 | $5,275 | $10,550 |
Should You Get a No-Penalty CD or a Regular CD?
Assessing your financial goals can help you decide whether you should get a no-penalty CD or a regular CD. But the main question is: Do you need easy access to your money?
No-penalty CDs are suitable for those who might need access to their funds before the term ends. This could be for unexpected expenses, emergencies, and such.
It is also a good option if you want your funds to be on standby for better investment opportunities.
Regular CDs do not have this flexibility and will typically incur withdrawal fees for closing your CD early. But, you will have more rates and terms to choose from some might have rates better than most no-penalty CDs.
Getting a no-penalty CD is a good option to avoid paying early withdrawal fees. Otherwise, building a CD ladder with short-term CDs might be helpful. But if you can keep your CD untouched until it matures, you can safely avoid paying penalties.
What's the Catch with No-Penalty CDs?
While no-penalty CDs don't incur early withdrawal penalties, most banks won't allow you to withdraw your money a week or two after opening your CD. After this initial period, you can withdraw early with no charges.
Also, when you do withdraw your no-penalty CD, you usually have to take out the whole amount. Most banks do not allow partial withdrawals. But some might let you withdraw only your interest earnings.
Yes, no-penalty CDs are typically federally insured for up to $250,000 by the FDIC or the NCUA. Thus, you can rest assured that your money is safe even if your bank or credit union fails but, make sure you open a CD at an FDIC-member bank or NCUA-member credit union!
Pros and Cons of a No-Penalty CD
No-penalty CDs can help you dodge withdrawal fees, but they come with their own advantages and disadvantages. Here's a look at the pros and cons:
Pros:
More flexibility
Since you don't have to pay any fees for closing a no-penalty CD early, your money is not as tied up as it is in regular CDs. This lets you pivot to better investments or rates when they come.
Secure and guaranteed returns
Like most CDs, no-penalty CDs are typically federally insured for up to $250,000. Your rate is also fixed during the term so you don't have to worry much losing money and interest rates changing.
Cons:
Might not have the best rates
No-penalty CDs might not offer high rates in exchange for some flexibility with your money. Though some banks may offer them at promotional rates which can be relatively higher than regular CDs.
Limited availability and term options
Unfortunately, no-penalty CDs are not always offered by institutions. And when they are available, you usually have limited options for term length.
No additional deposits and partial withdrawals
Unlike savings accounts, you typically cannot add more deposits to your no-penalty CD once it's opened. You usually can't make partial withdrawals either.
Early withdrawal penalties can average between 3 months to 1 year's worth of interest. The amount can differ between institutions, but the penalty amount usually depends on the CD's term.
Most long-term CDs will have higher penalties, but some short-term CDs can also charge you a full term's worth of interest. Make sure you read the fine print of your CD before you make any early withdrawals.
How to Choose the Best No-Penalty CD
If you're set on getting a no-penalty CD, here are some questions you can ask yourself while looking for one:
When can I withdraw my no-penalty CD?
Usually, you can withdraw your no-penalty CD a week or two after funding the account. But this is at the discretion of the bank or credit union.
Some may allow you to close your account six days after funding it[1]. It's best to check with your bank or credit union to confirm when you can withdraw your no-penalty CD.
What is the APY?
You want the highest rates to earn bigger returns. Take your time to shop for no-penalty CDs, and don't be afraid to ask your bank or credit union if there are relationship rates you are eligible for.
What is the term?
You want to get a no-penalty CD with a term that fits your financial goals. Although you have the option to withdraw flexibly, you should still get a no-penalty CD that can benefit you during a specific timeline.
What is the minimum deposit requirement?
Some no-penalty CDs may have minimum deposit requirements to open an account. This could range from as low as $50 to over $2,500. So, make sure to choose a no-penalty CD that fits your budget.
Alternatives to No-Penalty CDs
Although no-penalty CDs can address your liquidity needs, they may not be the best option for you. Here are other investment options you can consider:
High-yield savings accounts
An online high-yield savings account can let you add more deposits or withdraw money when you need to. But the rates are not fixed and may not be as high as some CD rates.
- Discover Online Savings:
$200 Cash Bonus - Western Alliance Bank:
High Yield Savings Account - 5.26% APY - U.S. Bank Smartly® Checking and Standard Savings:
Up to $800 Bonus - CIT Bank Platinum Savings:
5.05% APY - Quontic:
High Yield Savings - 4.50% APY
Money market accounts
Some money market accounts come with a debit card, ATM access, and a checkbook. They can also offer competitive rates but they can change over time, unlike CDs.
- Ponce Bank:
Money Market Deposit Account - 5.28% APY - American First Credit Union:
Money Market Deposit Account - 5.27% APY - SkyOne Federal Credit Union:
Money Market Deposit Account - 5.24% APY - Patriot Bank:
Money Market Account - 5.22% APY - Blue Federal Credit Union:
Money Market Deposit Account - 5.15% APY
High-yield checking accounts
High-yield checking accounts can offer decent rates and great perks if you meet certain criteria. These can include maintaining a minimum deposit or several transactions every month. But they can be good to use for day-to-day spending.
- Axos Bank:
Rewards Checking - Up to 3.30% APY - Consumers Credit Union:
Free Rewards Checking - Earn Up to 5% APY - Nationwide:
Advantage Checking - Up to 0.90% APY
CD ladders
You can build a CD ladder with short-term CDs to address your liquidity needs. The CDs will mature in shorter intervals which gives you some flexibility with your funds. Some might also have better rates than no-penalty CDs.
- Quontic:
6 Month CD - 5.05% APY - Western Alliance Bank:
6-Month High-Yield CD - 5.70% APY - SkyOne Federal Credit Union:
5-Month High-Yield CD - 5.40% APY - mph.bank:
10-Month High-Yield CD - 5.30% APY - Ponce Bank:
4-Month No Penalty CD - 5.30% APY
No-Penalty CD FAQs
Where can I open a no-penalty CD?
No-penalty CDs are usually offered by banks and credit unions, but not all institutions may have them available. Do some research online or ask a representative to confirm if they do.
Additionally, no-penalty CDs are not as common so there are usually limited choices for term length.
What other CD terms are available?
CD terms can range from as short as 1 month up to 10 years. However, not all banks offer the same CD terms. Check other institutions if the term you need is not available at your usual bank.
What are the types of CDs?
Here's a list of different types of CDs available:
- Term CD: standard CDs with fixed rate for fixed term
- No-Penalty CD: allows you to withdraw money early without any withdrawal penalties
- Bump-Up CD: includes an option to increase your rate during the term of the CD
- Add-on CD: includes an option to add more deposits to your CD balance
- Jumbo CD: for large deposits of usually $100,000+
- IRA CD: offers tax advantages for retirement savings
Bottom Line
No-penalty CDs might be a good alternative to regular CDs if you want to avoid early withdrawal penalties. But they are quite rare and may have limited term options.
When in doubt, step back and assess what will be a good investment for you. Ultimately, a no-penalty CD must play well with your financial goals.
References
- ^ eCFR. Truth in Savings (Regulation DD), Retrieved 10/25/2023
Write to Rue Atanacio at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.
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