Key Takeaways
- If you need to cash in a CD early, you’ll likely pay a penalty—but the cost can vary widely, so check the bank’s policy before you commit.
- Even if you stick to CDs with only mild early withdrawal penalties, you can still earn strong rates—up to 4.40% APY right now.
- While no-penalty CDs provide flexibility, they usually offer much lower yields, reducing what you can earn.
What It Costs to Cash In a CD Early
If you’re lucky enough to have cash you won’t need right away, a certificate of deposit (CD) can be a smart place to park it. In exchange for agreeing to leave your savings untouched for a set period, your bank or credit union will guarantee a fixed rate for the entire term. Unlike a high-yield savings account, a CD’s APY won’t change—so you’ll know exactly how much you’ll earn by the time it matures.
Still, it’s understandable to feel hesitant about locking up your money. What if you need it sooner than expected? If that happens, you can cash out a CD early—but you’ll pay an early withdrawal penalty. These penalties are set by each bank or credit union and can differ dramatically. So it’s important to know before you open an account what you’d be charged if you break the CD before maturity.
Penalties are usually expressed as a number of months—or in some cases, years—of lost interest. The longer the CD term, the higher the penalty tends to be. For instance, one bank might charge three months of interest on a 1-year CD but charge six months of interest on its 2-year certificate.
For example: Suppose you have a 1-year CD with a penalty of three months’ interest. If you cash out after four months, you’ll lose three-quarters of your earnings and keep just one month of interest. If you wait until six months, you’d lose half. The smaller the penalty, the less your overall return will shrink.
Why This Matters
Breaking a CD early isn’t the end of the world—but the penalty can bite into your returns. Understanding the potential costs ahead of time can help you pick a CD that keeps flexibility while still paying a great rate.
Top CDs That Offer High Yields and Mild Penalties
Fortunately, if the idea of locking up your cash makes you uneasy, you can find CDs that are much gentler with their penalties. By doing a little comparison shopping, it’s possible to earn strong yields and keep flexibility. We’ve made that easier by highlighting today’s top-paying CDs with what we consider mild early withdrawal penalties. All appear in our daily ranking of the best CD rates across terms, and none charge more than six months of interest. Some short-term CDs even limit penalties to just one to three months.
Warning
If you cash in a CD before you’ve earned enough interest to cover the penalty, your bank may take part of your principal to make up the difference. So if possible, hold the CD long enough to avoid that hit.
No-Penalty CDs Offer Flexibility—but Lower Returns
If you’re new to CDs—or just nervous about locking up your cash—a no-penalty CD might feel safer. These accounts let you withdraw your money anytime without paying a fee, offering flexibility that traditional CDs don’t. But they’re less common and are usually only available for short term lengths.
The trade-off is how much you’ll earn. No-penalty CDs typically pay a noticeably lower APY, especially on longer terms. While some shorter no-penalty CDs earn rates similar to standard versions, longer ones can trail by a full percentage point or more. That difference can add up over time.
Still, if you value access to your cash and want the certainty of a guaranteed rate, a no-penalty CD can offer peace of mind—even if it costs a bit in overall earnings.
Here are five currently available no-penalty CDs:
How We Find the Best Savings and CD Rates
Investopedia tracks rates from more than 200 banks and credit unions nationwide to identify the highest-paying accounts each business day. All institutions are federally insured, and only accounts open to customers nationwide with reasonable deposit minimums qualify. Read our full methodology here.
