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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. typically come with penalties for early withdrawals. These fees can put a dent in your savings. There is a CD, however, that allows you to pull your money out without being penalized and still gives you a fixed annual percentage yield (APY). It’s called a no-penalty CD. There are trade-offs with this type of CD, however. Here’s what to know about no-penalty CDs. What is a no-penalty CD
A no-penalty CD, also known as a “liquid” or “breakable” CD, earns interest over a defined period of time, called the term. The term can range from months to years. Unlike traditional CDs, however, no-penalty CDs allow early withdrawals without a penalty. Depending on your bank’s withdrawal policies, you might be able to withdraw money from a no-penalty CD as early as seven days after it’s been funded. The rules on withdrawals and fees should be available at your bank or on its website. A no-penalty CD will often earn a higher interest rate than a or . How no-penalty CDs can improve your finances
No-penalty CDs generally don’t impose a penalty for early withdrawal after six to seven days of funding the account. This is a convenient feature if a financial emergency arises. Like most other , a no-penalty CD offers a fixed APY, allowing you to lock in a rate even if yields decrease. A no-penalty CD also gives you the flexibility to switch to a different CD account or savings product if rates increase, offering you the opportunity to earn a higher return. But the flexibility of no-penalty CDs has a cost — lower yields than traditional CDs. Still, a no-penalty CD can help people commit to saving while allowing them access to their funds should the need arise. Pros and cons of no-penalty CDs
As with all financial products, no-penalty CDs have their pros and cons. Here are some things to take into account: Pros of a no-penalty CD
Added flexibility: The ability to take out money from your CD early without paying a penalty fee is important when you quickly need cash. When interest rates rise, a no-penalty CD offers another perk: an opportunity to earn a higher rate by withdrawing your money and putting it in another CD with a higher APY. Guaranteed rate: CDs pay a fixed interest rate that is often higher than what money market accounts and high-yield savings accounts pay, helping you to build your savings faster. Cons of a no-penalty CD
Withdrawal restrictions: You may not be able to make partial withdrawals. If you need to take out money early from a no-penalty CD, the bank may make you withdraw all of your cash and close the account. Deposit limits: Like a traditional CD, a no-penalty CD usually doesn’t allow additional deposits after the account is opened. How to choose a no-penalty CD
No-penalty CDs offer greater flexibility than regular CDs – but at a cost. The big drawback of no-penalty CDs is that the APYs tend to be lower than they are for traditional CDs. However, the ability to withdraw funds at any time could be a big plus if you have an emergency because you can access your cash without paying a penalty. Choosing a no-penalty CD could cost you some , but you will have the peace of mind of knowing that you can use the funds at any time. Be sure you understand when you can withdraw money from your no-penalty CD and how many withdrawals you are allowed to make. You might be required to withdraw the entire amount. Before buying a no-penalty CD, compare at several banks and use Bankrate’s to figure how much you could earn by putting your money in a CD. Which banks offer no-penalty CDs
Although a no-penalty CD has its benefits, it’s not a common product. Few financial institutions offer no-penalty CDs, so it might be tough to find one that suits your needs. Here are a : Ally Bank offers an 11-month no-penalty CD with no minimum deposit required to open. CIT Bank offers an 11-month no-penalty CD that has a minimum opening deposit of $1,000. Marcus offers 7-, 11- and 13-month no-penalty CDs, all of which require a $500 minimum deposit. : Synchrony offers an 11-month no-penalty CD that requires no minimum deposit to open. Bottom line
If you want to grow your savings without sacrificing liquidity, a no-penalty CD might be a good choice. Another option is a , which helps you build up your savings while giving you the flexibility to withdraw funds when you need to. — Bankrate’s contributed to an update of this story. SHARE: Matthew Goldberg is a consumer banking reporter at Bankrate. Matthew has been in financial services for more than a decade, in banking and insurance. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Robert R. Johnson, Ph.D., CFA, CAIA, is a professor of finance at Creighton University and chairman and CEO of Economic Index Associates, LLC. Related Articles