Usually, a certificate of deposit, or CD, comes with limited flexibility. If you withdraw money from your account before the term ends, you’ll pay a withdrawal penalty worth a few months of interest. But there’s a workaround.
A no-penalty CD offers a compromise -- you still earn a fixed-interest rate but won’t pay a penalty if you need to withdraw your funds before the CD term expires. The tradeoff is no-penalty CDs typically offer lower annual percentage yields than traditional and high-yield CDs.
“No-penalty CDs can be worth it depending on your individual financial goals and the current interest rate environment,” said Doug Carey, a chartered financial analyst and president of WealthTrace. “These types of CDs typically offer more flexibility than traditional CDs, which may make them appealing to some investors.”
If you’re on the fence about locking your money away for years in a CD, a no-penalty CD might set you at ease. Here’s everything you need to know about this specialty CD, the best no-penalty CD rates currently on the market and some alternative savings options to consider.
What is a no-penalty CD and how does it work?
Like a standard CD, a no-penalty CD has a fixed term and earns an APY that’s generally higher than a regular savings account. However, unlike traditional CDs, you won’t pay a penalty if you need to access your money before the CD term ends, or matures.
“This can be a good option if you think interest rates may fall and you want the flexibility to move your money to a higher-yielding investment if rates decrease,” said Carey. “However, no-penalty CDs typically offer lower rates than traditional CDs, so you may sacrifice some potential earnings for the flexibility.”
But that doesn’t mean you can withdraw your funds right away, like you can with a high-yield savings account. Most no-penalty CDs won’t let you withdraw your money until after the first week from the date you open your account. And, if you don’t pull your funds after the CD matures, it may auto-renew, depending on the bank.
CNET’s picks for the best no-penalty CD rates
| Bank | APY | Term | Minimum deposit | Withdrawal allowed |
| CIT Bank | 4.80% | 11 months | $1,000 | Full balance |
| Ally Bank | 4.25% | 11 months | $0 | Full balance |
| Synchrony Bank | 4.10% | 11 months | $0 | Full balance |
| Marcus by Goldman Sachs | 0.35%, 0.45% or 4.15% | 7, 11 or 13 months | $500 | Full balance |
More details on the best no-penalty CD rates
CIT Bank
- Min. deposit to open
- $1,000
- High-yield, no-penalty, jumbo and bump-up CDs available
- Terms range from three months to five years
- Minimum $1,000 deposit
- Early withdrawal penalty is three to six months of interest
About the bank: We like that CIT Bank offers several CD types and terms. You won’t pay any monthly maintenance fees, but must meet the $1,000 minimum deposit requirement. We like that aside from CDs, CIT Bank also offers competitive rates for savings and money market accounts. A checking account is also available if you prefer to keep all of your money with one bank.
Ally Bank
Read Ally Bank Review- Min. deposit to open
- $0
- No-penalty, bump-up and high-yield CDs
- Terms range from three months to five years -- depending on the type of CD
- Early withdrawal penalties range from two to five months of interest
- Loyalty reward of 0.05% for CDs you renew
About the bank: Ally is one of our favorite banks for opening a CD. It’s a full-service online bank with several deposit account options, including high-yield checking, high-yield savings and money market accounts. We especially like that none of Ally’s accounts require a minimum deposit or balance. If you’re eyeing a CD with Ally, we’re also fans of its 0.05% APY boost when you renew your CD for another term.
Like CIT, Ally is an online-only bank so you’ll need to be comfortable managing your account without physical bank access. ATMs are available, but you can’t deposit cash directly into your account.
Synchrony Bank
Read Synchrony Bank Review- Min. deposit to open
- $0
- Bump-up, high-yield and no-penalty CDs available
- Terms range from three months to five years -- depending on the type of CD
- No minimum balance or monthly maintenance fees
- Early withdrawal penalties range from three months to one year of interest
About the bank: Synchrony offers competitive interest rates for all of its savings options -- including money market accounts, CDs and high-yield savings accounts. It also offers extended customer service hours by phone and live chat online.
As an online-only bank, like the others on this list, Synchrony doesn’t allow cash deposits. It also doesn’t offer a checking account, so if you like to keep all of your bank accounts in one place, consider another bank on this list.
Marcus by Goldman Sachs
Read Marcus by Goldman Sachs Review- Min. deposit to open
- $500
- High-yield, no-penalty and bump-up CDs available
- Terms range from six months to six years -- depending on the type of CD
- Early withdrawal penalties range from three to nine months of interest.
- CD Maturity Center available 12 months before your CD matures to make changes to your CD beforehand -- including withdrawing money or closing the account
About the bank: Marcus by Goldman Sachs offers high-yield savings accounts and CDs. Its high-yield CDs require a minimum $500 deposit, though its savings accounts don’t have a requirement to get started. We like that you can make same-day transfers of up to $100,000 between outside bank accounts, and that you can reach customer service 24/7 by calling 855-730-7283. An extensive list of frequently asked questions is also available online.
However, there are some shortcomings. Marcus by Goldman Sachs doesn’t offer an ATM network, checking or money market accounts. You also can’t deposit cash or make mobile check deposits.
Alternatives to consider before opening a no-penalty CD
No-penalty CDs have some benefits, but they have key drawbacks you should weigh. Depending on your savings goals, another type of savings vehicle may be a better fit.
While rates remain competitive for most high-yield CDs, no-penalty CDs usually have lower rates and only one term to choose from. And depending on the bank, you may not be able to make partial withdrawals -- only for the full balance. If any of those drawbacks steer you away, it’s best to consider other options.
There are fully liquid options that are more flexible that also offer decent returns, said Lawrence Sprung, a certified financial planner and author of Financial Planning Made Personal, like a money market account or high-yield savings account. Both of these accounts offer competitive APYs and provide easy access to your savings. However, you can’t lock in a fixed rate. With savings rates likely to drop later this year, keeping all of your money in a variable savings account could lessen the interest you’ll earn. But you’ll still be able to make regular contributions and withdrawals with very few hiccups.
FAQs
When considering a no-penalty CD, first look for banks with the highest APYs. Then, consider any fees, minimum balance requirements and withdrawal restrictions. Some banks require you to withdraw your full balance, while others may allow a partial withdrawal. You also want to make sure you’re comfortable managing your account online since most online banks offer the best rates.
No, there generally aren’t any fees associated with a no-penalty CD, but each bank has its own fee structure. Be sure to check the bank’s full rates and fees disclosures before opening a new account.
Methodology
CNET reviews CD rates based on the latest APY information from issuer websites. We evaluated CD rates from more than 50 banks, credit unions and financial companies. We selected the no-penalty CDs with the highest APY with a variety of terms from among the organizations we surveyed.
Banks surveyed include: Alliant Credit Union, Ally Bank, America First Credit Union, American Express National Bank, Axos Bank, Bank of America, Bank of the West, Bank5 Connect, Barclays, BMO Harris, Bread Savings, BrioDirect, Capital One, CFG Community Bank, Citizens Access, Colorado Federal Savings Bank, Connexus Credit Union, Consumers Credit Union, Discover Bank, First Internet Bank of Indiana, First Tech Federal Credit Union, FNBO Direct, GO2bank, Golden 1 Credit Union, HSBC Bank, Huntington Bank, Lake Michigan Credit Union, LendingClub Bank, Live Oak Bank, M&T Bank, Marcus by Goldman Sachs, Merrick Bank, Nationwide (by Axos), Navy Federal Credit Union, NBKC, OneUnited Bank, Pentagon Federal Credit Union, PNC, Popular Direct, PurePoint Financial, Quontic Bank, Rising Bank, Salem Five Direct, Sallie Mae Bank, Santander Bank, Synchrony Bank, TAB Bank, TD Bank, TIAA Bank, Truist Bank, U.S. Bank, UFB Direct, Union Bank, USAA Bank, Vio Bank, and Wells Fargo.
The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.
