A no-penalty CD does away with many of the withdrawal restrictions that come with standard CDs.
In most cases, you can withdraw at any time, but some financial institutions place some limits.
The best no-penalty CDs tend to offer high APY rates and a flexible withdrawal policy, allowing you to compromise between profitability and flexibility.
These types of CDs, also known as liquid CDs, come packaged as different term CDs with longer-term CDs, allowing you to earn money for a longer time.
5 Best No-Penalty CD Rates for December 2022
This section will look at liquid CDs that offer higher-than-average rates while allowing for some flexibility in early withdrawals.
- The CFG Bank: -1.00% APY
- Ally Bank: 3.10% APY
- CIT Bank: 3.65% APY
- Marcus by Goldman Sachs: 3.05% APY
- America First Credit Union: 2.45% APY
1. The CFG Bank
- APY: -1.00% APY
- Term: 13 Month
- Minimum Deposit: $500
The CFG Bank offers several CDs, but it is only their 13 Month CD that comes with a one-time penalty-free withdrawal.
You can make the withdrawal at any point during the term as long as it’s six days after opening the account.
There is a minimum deposit requirement of $500, and you cannot deposit more than $250,000.
This rate is one of the highest on offer for a no-penalty CD. The bank is based in Baltimore, with branches across Maryland. Even so, you can easily open the CD online.
2. Ally Bank
- APY: 3.10% APY
- Term: 11 Month
- Minimum Deposit: $0
Ally Bank consistently makes it to top lists, and there is no exception here with their 11-month no-penalty CD.
You can withdraw your money at any time provided that six days have passed from funding your CD without incurring any penalty whatsoever.
Ally Bank does not charge any maintenance fees, so you get to keep all of your money.
There is no minimum deposit required to open the CD, and you get a reward in the form of an increase on the APY when you renew.
3. CIT Bank
- APY: 3.65% APY
- Term: 11 Month
- Minimum Deposit: $1,000
CIT Bank’s No Penalty CDs come with a term of 11 months and a minimum opening deposit of $1,000.
You can withdraw your money and any interest earned after seven days from funding your CD. Since this is a no-penalty CD, there are no early withdrawal fees.
There are no maintenance fees, and opening the account is entirely free.
4. Marcus by Goldman Sachs
- APY: 3.05% APY
- Term: 13 Month
- Minimum Deposit: $500
Marcus by Goldman Sachs is offering a No-Penalty CD with a term of 7 months.
They also have two additional CDs, including one with an 11-month term and another one with a 13-month term.
There is a minimum deposit requirement of $500 to open the account.
You can withdraw the total balance without paying a fee from 7 days after funding the account.
If you are unsure which CD will work out the best for you, Marcus’ website offers a handy calculator that’s configured for their CDs.
All you need to do is enter the amount you wish the deposit and choose the CD. Once completed, you will get an informative graphic that shows you how much interest you can earn.
5. America First Credit Union
- APY: 2.45% APY
- Term: 1 Year
- Minimum Deposit: $500
America First Credit Union’s No-Penalty CDs work slightly differently from what the rest of the competition offers.
Instead of giving you the option to withdraw at any point, you can only withdraw without having to pay the penalty during the first five days of each quarter.
The term is 12 months long, and there is a minimum deposit of $500. Unlike other CDs, you can also make additional deposits during the CD term.
These additional deposits are limited to $10,000 per month. You cannot deposit more than $100,000 in Flexible CD accounts.
What To Consider Before Getting A No-Penalty CD
No Penalty CDs come in different shapes and sizes.
While there is no one best no-penalty CD, you choose the one that best fits your requirements by looking at the account features.
These features, which tend to change from one bank or credit union that offers such CDs to the next, can help you choose the best account for you.
The APY (Annual Percentage Yield) rate tells you how much money you can expect to earn on the money you deposit in the CD.
Since you might be looking at an early withdrawal, always make sure that the rate compounds daily to maximize your take-home profits. The higher the APY rate, the more money you’ll earn.
Most no penalty CDs allow you to withdraw at any point after an initial grace period which usually lasts a few days.
It is important to note that this is not always the case. Some financial institutions may offer a regular window during which you can withdraw your money without having to pay a fine.
FDIC insured banks offer insurance on money saved in their accounts, usually up to $250,000 in any one category.
While it’s unlikely that you’ll need it, since member FDIC banks have to pass rigorous tests to offer this insurance, it’s still good to have.
Many credit unions offer NUCA insurance, which works very similarly to FDIC insurance.
For a credit union to offer this to its customers, it must be a federal credit union. Non-federal credit unions may provide other forms of insurance, so be sure to ask.
Online and Mobile Banking
Online banking and mobile banking offer account holders additional convenience.
Using these banking apps, you’ll have the facility to access your account from just about anywhere, helping you avoid queues and making for easier and faster withdrawals.
Since CDs are deposit accounts, many of them come with an initial deposit requirement.
Some also require you to have a minimum balance in your account before you can earn any interest.
This requirement may put some CDs out of reach, depending on how much money you were planning on depositing.
Pros & Cons
Just like everything else, no penalty CDs have their own set of pros and cons.
It’s essential to know what these are to help you decide if getting this type of CD is the right choice for your financial goals.
You get competitive rates.
One other benefit of CDs is that the rate is a fixed rate and will last for the entire term of the CD, even if it,s revised downwards.
However, you might find that some high-yield savings accounts might offer a higher interest rate.
You won’t pay fees for making an early withdrawal.
The biggest drawback of traditional CDs is the early withdrawal penalty.
When you take out a conventional CD, your money is locked in for the term, with early withdrawals incurring hefty fines.
No-penalty CDs do not have any early withdrawal penalties.
This flexibility allows you to withdraw your money should you suddenly find yourself in a situation where you need that money without losing out.
In the long term, this can prove to be a better financial decision than using your credit card, especially if you might miss payments.
The rates on offer are lower than other CDs.
As you might imagine, the ability to make an early withdrawal without getting a penalty comes at a price.
In most cases, this will be a lower APY rate than you would otherwise earn for a fixed CD of an equal term. While you get flexibility, you might be losing out on potential profits.
You can use one of the many free online CD calculators to work out how much money you can expect to earn.
If this does not meet your expectations, consider a no-penalty CD alternative instead. We will discuss a few different ones down below.
You cannot make more than one deposit and one withdrawal.
In most cases, CDs (including no penalty CDs) only allow one deposit at the beginning of the term.
When it comes to making withdrawals, you only get to make one withdrawal for the entire balance, with no partial withdrawals allowed.
There are exceptions such as America First Credit Union that enable you to make additional deposits every month; however, this is the exception rather than the rule.
No-Penalty CD Alternatives
The most significant advantage that no-penalty CDs have over other CDs is the flexibility to withdraw your money before the term ends without paying the penalty.
If the long-term commitment makes you uncomfortable, you might want to consider opening a CD ladder instead.
CD ladders utilize several CDs that start with different terms. For example, you can get 3 CDs with term lengths of 3 months, six months, and nine months.
When the CD reaches its maturity date, you renew it for the longest term in your ladder, which in this case, is nine months.
By setting up CDs this way, you get the higher rate offered on longer terms while having a CD mature in a maximum of 3 months, at which point you can withdraw it penalty-free.
Keep in mind that this is a relatively short-term ladder. You can also set up a longer-term ladder by taking out CDs with longer terms.
High-Yield Savings Accounts
One other option you might want to consider is a High-Yield Savings account.
These accounts tend to offer APY rates comparable to No-Penalty CDs, and you can make several withdrawals per month, penalty-free.
Many of these accounts have a six withdrawals limit per month. Still, you do not need to withdraw the entire amount – making them especially useful if you plan on making several withdrawals and deposits.
Using CDs to Build Your Credit Score
If you’re looking to improve your credit score, CDs can be an excellent tool to help you do this in certain situations.
Many financial institutions allow CD bank account holders to take out a loan against the CD, which is used as collateral.
Generally speaking, this type of loan is reported as a secured installment loan to the credit bureaus that the bank or credit union uses. Still, it’s always wise to confirm this.
What is a No Penalty CD?
A No Penalty CD is a type of CD that allows you to withdraw your money before the term is over without paying the penalty.
Standard and High-Yield CDs come with hefty fines for early withdrawals, which can wipe out any interest earned.
In some cases, the penalties can be so high they’ll even eat in the money you put in.
In comparison, No Penalty CDs do not charge any fees, letting you keep all of your money and any interest earned. Interest rates tend to be lower than what other types of CDs offer
What is the difference between a high-yield CD and a No Penalty CD?
A high yield CD is a particular CD that offers higher-than-usual APY rates, thus offering a high yield on the money you deposit.
These CDs tend to come with long terms and no option to make early withdrawals.
On the other hand, No Penalty CDs allow account holders to withdraw money before the terms end without paying any stiff penalties.
On the flip side, rates are much lower than those offered on a High-Yield CD, so you will not make as much money, even if you keep your money in the CD for the entire term.
Are no-penalty CDs good?
No-Penalty CDs can be an excellent way to save money.
If you’re setting money aside for an emergency fund or if it’s your first time opening a CD, no-penalty CDs can be an excellent option.
With no penalties to pay should you wish or need to make an early withdrawal, they have less risk and can still help you get a great rate to grow your savings.
Does Synchrony have a No-Penalty CD?
Synchrony Bank does not offer a No-Penalty CD at this time. Early withdrawals will incur a charge depending on your CD term and can range from 90 days to 365 days worth of simple interest.
No-Penalty CDs Are An Excellent Way To Grow Your Money
When it comes to personal finance, a no-penalty certificate of deposit can be a great advantage.
While no-penalty CD rates are not as enticing as regular CD rates, penalty-free withdrawals before the maturity date can be a great advantage.
If you’re looking for the best CD, keep in mind that is more to consider aside from no penalty withdrawals. The APY rate can play a huge factor in how much money you make, provided you can hold the CD for the entire term.
The good news here is that there are many CD options to choose from, so do take the time to consider everything before making your final decision.
If you have trouble saving, then a CD can be one of the best financial products around to help you embark on a healthier financial journey.
You can only make one withdrawal for the entire amount that might hold you back from doing so.
Other savings products such as money market accounts and online savings accounts allow for multiple withdrawals each month, making it that much harder to save money.
Consider taking it one step at a time. A 6-month CD might not earn you enough money to retire, but in 6 months, you’ll be that much richer and ready to take on a longer-term CD.
Remember that, after all, Rome wasn’t build in a day. A small step forward is almost always better than nothing at all.