Certificates of deposit offer savers a way to earn higher yields in exchange for locking their money away for a set period of time. The downside is that if you need your money early, you'll pay an early withdrawal penalty. No-penalty CDs offer higher yields without the penalty for early withdrawal.
The trick is to find a no-penalty CD that pays the highest rates. We track the best offers we can find and list them below. If you are aware of a better option, please let us know.
Featured Offer: FVCbank 12-Month No Penalty CD
- 12-Month No-Penalty CD
- APY: 4.60%
- Min. Deposit: $1
- No early withdrawal penalty
- FDIC Insured
Highest Rates on No-Penalty CDs
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How No-Penalty Certificates of Deposit Work
No-penalty CDs work like traditional CDs with one important exception. They do not charge a penalty if you take out your money early.
As with all CD accounts, the money must remain in the account for seven days. After that, you can withdraw your money at any time.
Like CDs in general, you deposit a lump sum into a CD. If and when you withdraw the money, you must take all of it. Unlike a checking, savings, or money market account, you do not make multiple deposits and withdrawals to and from a CD.
No-Penalty CDs vs Traditional CDs
The no-penalty feature does come at a cost. The best CD rates on a 1-year CD tend to be about 50 basis points higher (or more) than what you find on no-penalty CDs. If you think rates will rise the no-penalty CD may be worth the cost. The same is true if you believe you'll need access to the money before the end of the term.
If not, a traditional CD may be the better choice.
No-Penalty CDs vs Savings Accounts
We've found that the best no-penalty CD tends to pay a slightly higher APY than the best savings account rates.
No-Penalty CDs vs Money Market Accounts
We've also found the same to be true of MMAs. No-penalty CDs tend to pay slightly higher yields. Keep in mind, however, that this is true only for the top paying CDs. There are plenty of no-penalty CDs offered by well-known banks that pay below-market yields. Here it pays to shop around.
