Updated on Wednesday, March 16, 2022

CDs, or certificates of deposit, work under an easy-to-understand premise: You agree to place your money with a bank or credit union for a set amount of time, during which it will earn interest. At the end of the period, you get your money back plus a nice chunk of interest earnings. But if you withdraw money from your CD before the term expires — or before the CD “matures,” in financial parlance — the institution will charge you a penalty fee for breaking the terms of your agreement.

Generally depositors understand that they can’t touch their funds while they’re in the CD account. But the accounts below are special CDs that let customers withdraw money from a CD account with no penalty charge at whatever time they want. No-penalty CDs aren’t generally widespread, but we’ve selected the best available based on the following criteria: they are available nationwide and have no penalties for early withdrawal of funds.

1. CFG Bank

Headquartered in Baltimore, CFG Bank offers an array of financial products to consumers nationwide, both online and through its handful of branches across Maryland. It is the 5th-largest bank in Maryland, with over $2.3 million in assets.

The crown jewel of CFG Bank’s CD line-up is its 13-month CD, which you can open either online or at a branch. This CD is the bank’s only certificate of deposit that allows for a one-time, penalty-free withdrawal. There is a $500 minimum deposit for this product, which is also the amount that is required to earn its competitive APY of 0.80%. CFG Bank does not allow for additional deposits after the initial deposit, and all accounts face a seven days’ interest penalty if you make a withdrawal within six days of opening.

2. US Alliance Financial

US Alliance Financial, also known as US Alliance Federal Credit Union, has a promotional 11-month CD special with no early withdrawal penalty and a 0.65% APY. Dividends are compounded daily. The CD is not available as an IRA, HSA or CESA CD.

The institution has five branches in the north east and serves customers nationally online. Anyone can join. Employees of the International Business Machines Corporation (IBM) started the bank in 1966 and it’s grown to serve 125,000 members worldwide.

3. My eBanc

This Florida-based online savings bank may go by a somewhat generic name, but it’s a division of BAC Florida Bank, a financial institution with more than 45 years of history. The no-penalty CD offered here is called the Flex Time Deposit, and if customers who deposit at least $100,000 can earn an APY of 0.55%, which ranks near the top of the accounts on this list. Depositing at least $10,000 will earn you a decent APY of 0.60%.

Where this account truly shines is that it allows for two partial withdrawals of your funds without having to close your CD account entirely (as long as the balance still remains at $10,000 or more). All of the other no-penalty CD accounts on this list require you to withdraw all of the principal and any interest earned.

4. Ally Bank

Online-only bank Ally offers a single no-penalty CD account with an 11-month term because it has no minimum balance requirement, this account will attract consumers without a lot of money to spare who still want a no-penalty CD.

Similar to all of the other products listed, this Ally no-penalty CD account makes you wait for the seventh day after the initial deposit to withdraw your funds, and the bank doesn’t allow for partial withdrawals. The bank also offers what it calls its 10 Day Best Rate Guarantee, promising that if depositors fund this CD within 10 days of opening it, Ally will make sure the account earns the highest rate available should the bank change its rate within that 10 day period. It’s by no means a game-changer, but a nice bonus to avoid feeling left out if you deposit a pile of money in your CD on Thursday, only to discover on Friday that Ally hiked its rates. If you renew your CD at the end of its term, Ally offers a 0.05% Loyalty Reward.

5. Marcus by Goldman Sachs®

Marcus by Goldman Sachs requires a $500 deposit for customers to start earning solid APYs as high as 0.45%. In addition, these accounts don’t allow any partial withdrawals of the principal. If you deposited $1,000 in an account and want to withdraw money before that CD matures, you won’t be hit with any penalties — but you have to take out all $1,000 and your account will then be closed.

6. Colorado Federal Savings Bank

Branchless bank Colorado Federal Savings Bank offers an array of financial products, including a number of certificates of deposit ranging from a 1-month to a 60-month. Among its CD offerings is a no-penalty CD that is worth highlighting.

The Colorado Federal Savings Bank features an 11-month no-penalty CD with an APY of 0.70%. This CD requires a minimum deposit of $5,000, with no maximum deposit limit. As a no-penalty CD, you’re able to withdraw the CD’s full balance – including interest and principal – with no penalty, seven days after you begin funding the account.

7. Bellco Credit Union

Based in Colorado, Bellco Credit Union offers Smart Move CDs, which allow you to make one withdrawal during the account term with no penalty, as long as you maintain a minimum CD balance of $1,000. You could also make a one-time addition to the CD of $100 or more and “bump up” the CD to the next term, increasing its APY.

To join Bellco Credit Union, you can make a one-time $10 donation online to the Bellco Foundation, a 501(c)3 non-profit group.

8. MainStreet Bank

MainStreet Bank is offering a 1-year, no-penalty CD with a 0.75% APY. The minimum balance to open the CD and earn interest is $500. The bank offers other CD terms from six months to five years, however the only no-penalty CD is the one-year term option.

9. America First Credit Union

America First Credit Union was founded in 1939, and even though the credit union primarily serves communities in Utah, Idaho and Nevada, there are ways for people from outside the area to become members through affiliated associations.

The Flexible Certificate Account offered by America First Credit Union is a solid 12-month no-penalty CD offering 0.30% APY and requiring just a $500 minimum deposit. The account also allows members to make additional deposits into the CD — which is a rare feature for a no-penalty CD account — up to $10,000 a month, with a limit of $100,000 per member.

10. CIT Bank

If you have the $1,000 minimum deposit for this no-penalty CD account, CIT Bank will give you a rate of 0.30% APY on an 11-month term. While that’s not as much as you can earn with a comparable CD term with some of the options above, the deal offered by CIT could provide a decent alternative.

What to watch out for with no-penalty CDs

Although no-penalty CDs, like any certificate of deposit, carries with it minimal risk of losing your principal, it’s important you thoroughly understand the terms of the account and understand what circumstances you can withdraw funds. Otherwise, your supposedly no-penalty CD will start devouring your funds with fees.

One of the biggest differences between no-penalty CDs lies with whether you can make partial withdrawals or if you have to withdraw the entire amount. If the account allows for partial withdrawals, make sure you understand if the bank or credit union considers a full withdrawal (and closure of the account) count toward your withdrawal limit. It’s easy to imagine a scenario where you skim the fine print, read a CD allows for two partial withdrawals, make those two withdrawals, then get hit with a penalty when you later try to close the account early because the bank considers that a “third” partial withdrawal.

Another concern you should have when shopping for no-penalty CDs is whether or not the bank or credit union will continue to offer it. AgFed Credit Union, for example, occasionally offers competitive no-penalty share certificates but they’re only available for funding for a limited time. If you snooze on some of these no-penalty CDs, don’t be surprised if they have vanished by the time you are ready to pull the trigger and fund one.

Is a no-penalty CD worth it?

According to Ken Tumin, our in-house savings expert and founder of LendingTree-owned DepositAccounts.com, no-penalty CDs aren’t a bad option since there isn’t really much risk to trying one out. Just aim to find the longest term no-penalty CD deal you can since the rates will generally be higher.

“When the bank has your money for longer, they’ll usually offer a higher interest rate — and that interest will have more time to compound,” Tumin says. “So if you open a no-penalty CD, you should go for the one with the longest term possible. The rates will likely still be higher, and after all, if you decide to take the money out early, it’s no problem.”

Also, look for no-penalty CDs that offer the benefit on full withdrawals. Some banks only allow penalty-free partial withdrawals, Tumin warns.

Building a CD ladder to avoid withdrawal fees

If you’re interested in using CDs while still maintaining access to your funds, there’s another approach you could consider: building a CD ladder.

It can be a complicated strategy, but in short, you split your deposit up into smaller chunks and open several CDs with various term lengths. When the CDs reach maturity, you can renew the account and lengthen the term or withdraw the money if you need to. This way, you can take advantage of higher interest rates while still avoiding early withdrawal fees.

Source: https://www.magnifymoney.com/blog/best-of/no-penalty-cd-rates/

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