Best No-Penalty CD Rates of 2024
Updated November 8, 2024 at 10:53 am
Investing in a certificate of deposit (CD) has always been an attractive money-maker for investors who don’t want to lose money. After all, investing with a federal insurance bank or credit union guarantees you a safe place to store your money while earning interest.
The best CDs earn competitive rates and have no downside—unless you need your money before the time period is up. In that case, you’d get your money, minus a fee, which might be as low as seven days’ interest or something considerably higher.
That’s where no-penalty CDs come in. No-penalty CDs allow investors to invest in a CD, knowing that if they have a financial emergency or simply need that income for a different investment or expenses, they can get it back without a fee.
Here’s a look at some of the best no-penalty CDs available. Each offers competitive annual percentage yields to help your money grow quickly but stands out for features like term lengths and minimum deposit requirements.
Our Methodology Newsweek Vault’s banking experts have done hundreds of hours of research to present you with all the latest information about your banking options. Whether you’re interested in opening a new checking account or savings account, our research spans all the top online banks, credit unions and brick-and-mortar branches.
We assessed the following five key factors to help you choose the best account for your personal finance needs.
- Associated fees
- ATM access
- Balance requirements
- Customer service
- Interest-earning potential
Our Picks - Best for a High APY: Climate First Bank
- Best for New Investors: Ally Bank’s No-Penalty Certificate of Deposit
- Best for Bigger Investors: CIT Bank
- Best for Online Bank: Synchrony Bank
- Best for Low Minimum Deposit: Mission Valley Bank
- Best for Monthly Withdrawals: Technology Credit Union
- Best 11-Month CD: USAlliance Financial
- Best for 13-Month CD: Marcus by Goldman Sachs
- Best for a Careful Planner: America First Credit Union
9 Best CD Rates With No-Penalty of 2024
Best for a High APY
Climate First Bank
Vault Verified
Why We Chose It
If you’re looking for a CD with a high interest rate, Climate First Bank currently has one of the best out there. Its 6- and 12-month penalty-free CDs currently offer APYs of 4.34% and 2.91%, respectively.
Pros
- Low minimum deposit
- Ability to add more money later, in $100 increments
Cons
- There aren’t unlimited withdrawals
- You can only withdraw half of your initial deposit without incurring a penalty
- If you withdraw your money within the first six days, there will be a penalty
Best for New Investors
Ally Bank
Vault Verified
Why We Chose It
With Ally Bank no minimum deposit is required to open your account. You can open Ally Bank’s No-Penalty Certificate of Deposit with $0 dollars and withdraw your full balance and interest any time after the first 6 days of funding your CD.
Pros
- No minimum deposit required
- No monthly maintenance fees
- High interest rates
Cons
- If you withdraw your money, you have to take it all back (no partial withdrawal)
- It’s an online bank, so there’s no in-person customer service
- Because it’s an online bank, you can’t make a cash deposit
Best for Bigger Investors
CIT Bank
Vault Verified
Why We Chose It
For a $1,000 minimum deposit, CIT Bank has a no-penalty CD with a 3.50% APY, which is a generous high-yield interest rate.
Pros
- High interest rate
- No monthly maintenance fees
- Daily compounding interest
Cons
- $1,000 minimum deposit
- Online bank, so no in-person customer service
- During those first six days, no withdrawals are permitted
Best Online Bank
Synchrony Bank
Vault Verified
Why We Chose It
Synchrony Bank offers a range of high-yield products, from savings and money market accounts to CDs. You can choose from three different type of CD products, including an 11-month no-penalty CD.
Pros
- Several high-yield products to choose from
- No minimum deposit
Cons
- Can only add funds during 10-day grace period after CD matures
- If you withdraw your money within the first six days, there will be a penalty
BEST FOR LOW MINIMUM DEPOSIT
Mission Valley Bank
Vault Verified
Why We Chose It
Through the online platform Raisin, you can snag a 3-month CD with Mission Valley Bank with a competitive 4.20% APY. Plus, you only need $1 to open an account.
Pros
- Low minimum opening deposit
- Quick and easy online application process
Cons
- You can only withdraw after 30 days of opening the account
- Can only do one full withdrawal during your CD term
BEST FOR MONTHLY WITHDRAWALS
Technology Credit Union
Vault Verified
Why We Chose It
The Liquid Certificate Account at Technology Credit Union is a 3-month, 4-month, or 5-month certificate of deposit that lets you make one withdrawal a month without penalty. These are ideal for people who want to park their funds for a short term without worrying about being locked in.
Pros
- Flexible short-term CD options
- You can take out as much money as you need
Cons
- Must meet credit union eligibility requirements (live, work, worship or attend school in certain counties in California or Idaho)
- Need to maintain a minimum of $1,000 to get the advertised APY
- Must wait at least six days in between withdrawals
BEST FOR 11-MONTH CD
USAlliance Financial
Vault Verified
Why We Chose It
USAlliance Financial’s 11-month certificate of deposit is the only certificate account term available with no early withdrawal penalty. The APY is competitive and your interest compounds daily.
Pros
- Competitive interest rates
- Dividends compounded daily and credited to your account monthly
Cons
- You can only withdraw the entirety of your funds once
- Required minimum deposit of $500
- Need to be a member of the credit union to open an account
Best for 13-Month CD
Marcus by Goldman Sachs
Vault Verified
Why We Chose It
Marcus by Goldman Sachs offers three no-penalty CDs, but its 13-month CD has the highest APY. It can be hard to find CDs without a penalty that go longer than 11 months, so this one is definitely something worth considering.
Pros
- Lengthy investment time
- High interest rate
- Low minimum investment ($500)
Cons
- Can’t withdraw any money for six days
- No partial withdrawals
- No in-person customer service
Best for a Careful Planner
America First Credit Union
Vault Verified
Why We Chose It
The Flexible Certificate Account at America First Credit Union is a 12-month certificate of deposit that allows you penalty-free access to any or all of your money during the first 5 calendar days of each quarter, in the calendar year. So the first five days of January, April, July and October.
Pros
- High interest rates
- You can add money to the CD every month
- You can withdraw money each quarter, penalty free
Cons
- You can only withdraw money the first five days of each quarter
- If you withdraw at the wrong time, you could lose 60 days of interest
No-Penalty Certificate of Deposit Overview
If you’re not familiar with the concept of no-penalty certificate of deposits, not to worry. That’s what we’re here for. We’ll cover it all.
What Is a No-Penalty CD?
A no-penalty certificate of deposit (CD) allows people to put money into an investment for a certain amount of time. If needed, you can withdraw it without losing any of the interest you have accrued. The only exception is that you will generally need to keep your money in the CD for six days. But after that, on the seventh day, you can withdraw the money from your CD without a penalty.
Ideally you’ll keep your money in the CD. It’s there to collect interest, and pulling it out prematurely goes against what you’re trying to accomplish. But the allure of a no-penalty CD is that if you must withdraw the money, you can, without any financial punishment.
How Do No-Penalty CDs Work?
No penalty CDs work in the way that any certificate of deposit works, except that if you need to withdraw your money before the agreed-upon time period ends, you can, without losing any of the interest you’ve earned. With a typical CD with a penalty, you can withdraw your money before it matures, but there will be a cost.
According to federal law, this penalty will be at least seven days’ worth of interest. But that’s just a minimum. You could lose a month or a year’s worth of interest or more since banks can charge as much of a penalty as they choose. So you always want to read the fine print before you invest in a CD. But, again, a no-penalty CD means that if you have a financial emergency, you can withdraw your money and not lose all of the interest you have been collecting.
Who Should Get a No-Penalty CD?
Anybody interested in a safe way to invest is a good candidate for investing in a CD. After all, you’re guaranteed to make money when you invest in a certificate of deposit. But if, for instance, you want to invest in a 9-month CD, and you believe it’s possible that you could need the money you’re investing sooner (perhaps due to a financial emergency or maybe you’re house hunting and may need that cash as part of your down payment), then you should consider investing in a no-penalty CD instead of one that has a penalty.
Pros and Cons of No-Penalty CDs
As with any investment, there will always be pros and cons. Here are the main ones.
Pros of No-Penalty CDs
- No penalties for withdrawal
- Typically higher interest rates than a savings account
- Guaranteed interest earnings
Cons of No-Penalty CDs
- You may not be able to do a partial withdrawal
- You may have six days at the start where you can’t withdraw your money
- You’ll typically earn less interest than a CD that does come with a penalty.
What to Consider When Choosing a No-Penalty CD
If you’re thinking about investing in a no-penalty CD but are unsure if it’s the right investment for you, you’ll want to look at several factors before making a decision.
Time
Think about the time involved with your no-penalty CD. Compared to a conventional certificate of deposit with a penalty for early withdrawal, no-penalty CDs tend to have shorter time frames—often three to 12 months—allowing less time for your interest to grow. It may benefit you to have a shorter time frame, but if you feel like you won’t need the money for a long time, you may prefer to invest in a CD that does come with a penalty, in exchange for a higher interest rate.
Interest Rate
If you suspect interest rates will rise, a no-penalty CD allows you to withdraw your money without penalty. That way you can re-invest in a CD with higher rates.
Penalty
The rules for withdrawing your money from a no-penalty CD vary. You typically have to wait six days before you can withdraw without a penalty. After that, a bank may let you withdraw at any time. But you’ll want to read the fine print to be sure. For example, America First Credit Union only allows one penalty-free withdrawal each quarter.
Alternatives
No-penalty CDs can be an excellent way to earn money, but it isn’t the only way. If you’re pretty certain that you will need to withdraw your money sooner rather than later, you may want to put your money in an account that earns high rates but doesn’t charge penalties. Top options to consider include:
Frequently Asked Questions
Are No-Penalty CDs a Good Idea?
If you’re looking to park your money somewhere safe for several months or up to a year, and you absolutely can’t afford to see the value of your investment go down, but you also want to see your money earn more interest than it typically would in a savings account, a no-penalty CD might be a good idea.
Can You Lose Money If You Invest in a No-Penalty CD?
Generally, no. The beauty of a no-penalty CD is that you will not lose any of the principal if your money is with an FDIC-insured bank or NCUA-insured credit union.
What is a CD Ladder?
CD laddering is a financial strategy in which investors will purchase several CDs and across staggered maturity dates. For instance, if you have $3,000, you could open three CDs with terms ranging from a year to three years. That way, while your money is invested in CDs, if you need the money, you can grab it each year, once you reach the maturity date. It could be an effective game plan if no-penalty CDs don’t interest you and you don’t mind having your money locked up for a little while.
What’s the Difference Between a High-Yield CD and a No-Penalty CD?
A high-yield CD features APYs as high as 5%, if not higher. A no-penalty CD might also offer competitive interest rates. The main difference is with a standard high-yield CD, your funds are locked in until its maturity date. If you make an early withdrawal, you’ll need to pay a penalty. A no-penalty CD lets you take out funds whenever you like. However, there might be a monthly cap on how much you can take out of your CD. No-penalty CDs typically have slightly lower rates than standard high-yield CDs.
How Do You Find the Highest No-Penalty CD Rates?
You can find the highest no-penalty CD rates by researching your options online. Most financial institutions will post their current no-penalty CD rates on their website. Rates are prone to change, so it’s a good idea to check with the bank or credit union right before opening a CD.
Newsweek writer Jackie Lam contributed to this post.
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