Thursday, 29 July 2021

The Best No-Penalty CD Rates

The Best No-Penalty CD Rates
23 Feb


Although CDs can offer higher rates than other types of deposit accounts, they come with one clear downside — the dreaded early withdrawal penalty. The penalty for cashing out your CD before the term is up varies by bank but will typically cost you at least a few months’ worth of interest earnings.

Because they’re not vulnerable to stock market volatility and generally carry higher interest rates than regular savings accounts, a CD is often worth the inconvenience of locking away your funds. However, in a rising rate environment, you may be less inclined to want to lock your money up in a CD for fear or missing out on an opportunity for a higher rate down the line.

No-penalty CDs, while rare, do indeed exist and are increasing in number these days. They can offer a bit of both worlds, making it possible to enjoy higher interest than your standard savings account might offer without having to worry about locking away your money for good should you need it.

Below, we chose the best no-penalty CDs available at this time. It was slim pickings, as not many banks offer these products.

Methodology: We selected the top five nationwide banks that offer the highest rates on no-penalty CDs that include a relatively low minimum balance to earn the APY.

The best no-penalty CD rates in February 2019

Marcus by Goldman Sachs®

Three no-penalty CD options with rates that vary by term length.

Term APY Minimum balance to earn the APY
7-month 2.25% $500
11-month 2.30% $500
13-month 2.35% $500

Marcus, a property of Goldman Sachs Bank USA, offers a no-penalty CD which allows fee-free withdrawals seven days after account funding. The minimum opening deposit is $500, and estimated APY ranges based on the CD term.

With these options, it likely makes the most sense to just go for the 13-month no-penalty CD with Marcus. You don’t risk getting hit with a penalty if you choose to take your funds out early anyway and you’ll enjoy a higher rate than the shorter-term options.

Ally Bank

One no-penalty CD offering with rates that vary by deposit size.

Term APY Minimum balance to earn the APY
11 months 1.80% Up to $5,000
11 months 2.15% $5,000
11 months 2.30% $25,000

Ally Bank offers a straightforward no-penalty CD, which allows you to withdraw your full balance and interest earnings anytime after the first six days of funding the account. The CD is compounded daily over a term of 11 months. Interest rates vary based on your initial deposit, but even the low end is quite competitive.

Chartway Credit Union

One no-penalty share certificate with varying minimum deposit requirements.

Term APY Minimum balance to earn the APY
12-month share certificate 2.15% $500

Chartway Federal Credit Union offers a wide array of CDs, which they call Share Certificates, many of which do carry early withdrawal fees.

But its 12-month no-penalty Share Certificate account offers an estimated APY of 2.15% over its year-long term. Minimum initial deposits vary by state, but start as low as $500.

Keep in mind, however, that as a credit union, you will have to prove your eligibility to open an account with this firm — which may be as simple as claiming residency in one of the states it operates in.

CIT Bank

One straightforward penalty-free CD.

Term APY Minimum balance to earn the APY
11-month 2.05% APY $1,000

CIT Bank’s no-penalty CD carries an 11-month term and a $1,000 minimum opening deposit. You can withdraw your cash and any accrued interest penalty-free starting seven days after the funds are received by the bank.

Honorable mention: AgFed

It’s not quite as strings-free as the other deals on this list as you’re allowed just one penalty-free withdrawal over the term of the CD. But it’s still worth including.

Term APY Minimum balance to earn the APY
6 months 1.80% $1,000
12 months 2.75% $1,000
18 months 2.85% $1,000
24 months 2.95% $1,000
36 months 3.05% $1,000
48 months 3.15% $1,000
60 months 3.25% $1,000

AgFed offers a range of CDs whose estimated APY rates vary depending on term. Terms range from six to 60 months, and the minimum initial deposit is $1,000.

AgFed’s CDs do levy substantial early withdrawal penalties, but there’s a loophole: a single withdrawal can be made during the original term of the certificate without a penalty being imposed. Any additional withdrawals will, however, be subject to their penalties, which vary based on the term of the CD but sometimes mean forfeiting all of your interest earnings.

Learn more: Is a no-penalty CD worth it?

According to Ken Tumin, our in-house savings expert and founder of LendingTree-owned, 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’s 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.

For a step-by-step guide to building a CD ladder, check out our guide linked above. And for even more savings strategies and tactics, keep your eye on the blog. We’re always reviewing the latest financial products and accounts to help you find the best solutions for your money.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jamie Cattanach


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