A certificate of deposit (CD) is an investment option offered by banks and credit unions when you want to invest a portion of your money and “lock” it up for certain amount of time. Because the money tied up in CDs are locked for a length of time, banks offer an interest rate that is higher than the usual savings account rate.
CDs are ideal for those who want to make investments for the short to medium term.
The process of opening up a CD is pretty simple, but the main point of CDs is for the money to remain untouched for however long the CD term is. So if you withdraw the money early, banks levy a penalty, one that’s usually pretty high.
Below are the early withdrawal penalty fees for 10 major banks in America, which include Bank of America®, Chase, Capital One 360, Ally, Discover Bank, Citibank, Ever Bank, American Express Bank, US Bank, and Wells Fargo.
|Compare||1-year deposit||5-year deposit|
|Ally Bank||2 months' interest||2 months' interest|
|Capital One 360||3 months' interest||6 months' interest|
|Discover Bank||3 months' interest||6 months' interest|
|EverBank||1/4th of the total interest you would have earned over the course of the CD term||1/4th of the total interest you would have earned over the course of the CD term|
|American Express||3 months' interest||6 months' interest|
|Bank of America||$25 + 3% of withdrawal amount||$25 + 3% of withdrawal amount|
|Chase||$25 + 1% of withdrawal amount||$25 + 3% withdrawal amount|
|Wells Fargo||3 months' interest||12 months' interest|
|Citibank||3 months' interest||6 months' interest|
|U.S. Bank||$25 + either 1/2 of the interest you would have earned if the funds were withdrawn after maturity OR 1% of the withdrawal amount, whichever is greater||$25 + either 1/2 of the interest you would have earned if the funds were withdrawn after maturity OR 3% of the withdrawal amount, whichever is greater|
Since the fees associated with an early withdrawal are pretty severe, it is in your best interest not to withdraw early. If you’re prepared to lock your money up into a CD, invest with the mindset that the money will be unavailable and inaccessible for at least the duration of the CD term. That way, you won’t be tempted to withdraw early.
Some banks offer different penalty fees for each individual term limit they offer (6-month, 18-month, 24-month, for example) and some impose the same fees across all their CD terms. Rates may vary from state-to-state, so make sure to check each bank’s website for more detailed fee schedules. Fee schedules can usually be found under the CD section, under “Fees” or an FAQ section.
CD Rates Report June 2013: New Online Bank Offers Top 1-Year CD