A certificate of deposit, or CD, is a type of savings account that holds a fixed amount of money for a fixed period of time. For most CDs, your cash isn’t accessible until your term length is over, whether it’s a 1-year CD or a 5-year CD.
If you do decide to withdraw funds from your CD before the term expires, you’ll usually be penalized. This, and the fact that CDs earn a higher APY on deposits — CD rates are still over 4% in many cases — is how CDs differ from traditional savings accounts.
A no-penalty CD is a type of certificate of deposit that allows individuals to withdraw funds early without a fee, although there are pros and cons to opening one.
Best no-penalty CD rates December 2024
Use our tool, in partnership with Bankrate, to compare the rates of some of the best CD accounts available now.
Here is a selection of the best no-penalty CD rates, many of which can be found via Raisin.
Ponce Bank
APY: 4.00%
Minimum deposit: $1
Term: 4 months
Technology Credit Union
APY: 4.00%
Minimum deposit: $1,000
Term: 5 months
Sallie Mae Bank
APY: 3.95%
Minimum deposit: $2,500
Term: 14 months
America First Credit Union
APY: 4.20%
Minimum deposit: $500
Term: 3 - 5 months
Farmers Insurance Federal Credit Union
APY: 4.50%
Minimum deposit: $1,000
Term: 9 months
US Alliance Financial
APY: 4.00%
Minimum deposit: $500
Term: 11 months
Marcus by Goldman Sachs
APY: 4.00%
Minimum deposit: $500
Term: 11 months
GreenState Credit Union
APY: 4.30%
Minimum deposit: $1,000
Term: 13 months
SkyOne Federal Credit Union
APY: 4.00%
Minimum deposit: $1,000
Term: 11 months
Mission Valley Bank
APY: 4.20%
Minimum deposit: $1
Term: 3 months
Withdrawing funds from a no-penalty CD
With a no-penalty CD, sometimes called a liquid CD or penalty-free CD, you’ll have to wait a week after funding the account before you can withdraw funds. And while penalty-free withdrawal can be useful if you think you might need the cash at some point in the foreseeable future, keep in mind that it’s not as easy as withdrawing from a traditional savings account.
You’ll need to give your bank advance notice before taking out funds. Additionally, many institutions require you to withdraw all cash from an account, not just a partial amount, if you decide to “break open” your CD.
Opening a no-penalty CD account
Like other CD accounts, no-penalty CDs offer higher APYs on deposits than traditional savings accounts. Therefore, they're good savings options for individuals that want guaranteed returns on their savings but don’t want to commit to a traditional CD account in case they need access to their cash before the CD maturity date. Most of the time, no-penalty CDs have relatively short terms, typically under 13 months.
With a no-penalty CD, you’ll lock in an APY when opening the account. If banks drop rates, your APY won’t be affected. On the other hand, since there are no penalties for withdrawing your cash early, you have the option to put your cash in a new CD account if rates go up. Our savings calculator can help you determine just how much you’ll earn in interest after your CD term is through.
Before opening any kind of savings account, it’s important to make sure your bank is federally insured. Banks that are FDIC-insured protect up to $250,000 in individual deposit accounts and up to $250,000 for each person’s share of joint accounts. Deposits in federal credit unions are covered by the National Credit Union Administration (NCUA), protecting up to $250,000 per credit union member (whether in an individual or a joint account).
No-penalty CDs vs savings accounts
Pros of no-penalty CDs
- Accessibility: Non-penalty CDs allow you to withdraw funds before the CD’s maturity date. If an unexpected emergency were to arise, you won’t have to pay a hefty fee to take out your cash, which can give individuals peace of mind.
- Maximize earnings: Since no-penalty CDs allow you to take out cash for no fee, it’s beneficial if banks raise rates. You’ll be able to take out cash and put it in an account with a higher APY.
- Guaranteed returns: Because most CD accounts are FDIC insured and have higher APYs than traditional savings accounts, they offer fixed, predictable and safe returns on savings.
Cons of no-penalty CDs
- Regular CD rates: There is a drawback to the added flexibility of no-penalty CDs. Usually, no-penalty CDs don’t offer APYs as high as those on a standard CD account.
- No partial withdrawal: If you decide to “break open” your non-penalty CD, you’ll likely have to withdraw your entire savings, not just a partial amount.
- No additional deposits: Like standard CD accounts, in most cases, cash can only be deposited upon opening the non-penalty CD. No additional deposits can be made.
Bottom line
If you're unsure whether or not you'll need to access funds from your CD before its maturity date, a no-penalty CD can be a good option. With a no-penalty CD, you won't be charged an additional fee if you decide to withdraw your balance before the term is through.
However, considering CD rates have taken a hit following the latest Fed meeting, keeping your cash in a CD account for as long as possible can help you maximize your savings.
