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The best no-penalty CDs (certificates of deposit) offer a competitive annual percentage yield (APY) and fee-free access to your cash. Unlike a traditional CD, these CDs allow for penalty-free withdrawal of your full balance prior to the CD’s maturity date, usually about a week after you make your initial deposit. The best no-penalty CD rates range from around 3.00% to 5.00% APY. Below, we look at the best banks and credit unions for no-penalty CDs.
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Best No-Penalty CD Rates of April 2024
We’ve compared 16 no-penalty CD accounts at 14 nationally available banks and credit unions to find some of the best no-penalty CD accounts around. See below to learn more about why we picked each account, the pros and cons, and to access individual bank reviews.
APYs and account details are accurate as of April 16, 2024.
Summary: Best No-Penalty CD Rates
Certificate | Forbes Advisor Rating | Annual Percentage Yield | Minimum Deposit Requirement | Interest Compounding Frequency | |||||
---|---|---|---|---|---|---|---|---|---|
USAlliance Federal Credit Union No-Penalty CD | 4.8 | 4.80% | $500 | View More | Daily | ||||
Ally Bank No-Penalty CD | 4.2 | 4.00% | None | View More | Daily | ||||
Kinecta Federal Credit Union 12-Month Liquid Certificate |
|
3.3 | 3.00% | $100 | View More | Monthly | |||
Colorado Federal Savings Bank No-Penalty CD | 3.8 | 3.50% | $5,000 | View More | Daily | ||||
CIT Bank No-Penalty CD | 3.3 | 3.50% | $1,000 | View More | Daily |
Methodology
To create this list, Forbes Advisor analyzed 16 no-penalty CD accounts across 14 financial institutions, including a mix of traditional brick-and-mortar banks, online banks and credit unions. We ranked each institution on data points within the categories of APY, minimums, compound interest schedule, customer experience, digital experience, available terms and overall availability. Then we analyzed each account by CD term and CD.
The following is the weighting assigned to each category for the star rating:
- APY: 50%
- Minimum deposit requirement: 12.5%
- Customer experience: 10%
- Digital experience: 10%
- Compound interest schedule: 7.5%
- Availability: 5%
- Available terms: 5%
CD accounts with the highest APYs rose to the top of this list. Higher minimum deposit requirements affected scores negatively. Accounts with daily compounding interest schedules were scored higher than those with monthly or quarterly schedules. To appear on this list, the account must be nationally available.
To learn more about our rating and review methodology and editorial process, check out our guide on How Forbes Advisor Reviews Banks.
How To Find the Highest No-Penalty CD Rates
The key to finding the highest CD rates on no-penalty CDs is to comparison shop across a variety of banks, credit unions and other financial institutions. Be open to online banks and credit unions in particular, as they tend to offer better rates to stay competitive with larger financial institutions.
The longer you keep your money in a CD account, the higher your rate may be, so consider no-penalty CDs with longer term lengths to get the best rate.
Bear in mind that some no-penalty CDs have minimum deposit requirements, and you may need to deposit more money to benefit from the highest rates.
What Is a No-Penalty CD?
A no-penalty certificate of deposit, much like a traditional CD, is a savings product that earns interest over a fixed period of time—known as the term. Unlike a traditional CD, which charges a penalty if you pull out money before the term ends, no-penalty CDs offer the ability to withdraw money early for free.
Both no-penalty and traditional CDs offer higher interest rates than regular savings accounts, so you can grow your money faster. But you pay for the flexibility of no-penalty CDs with lower interest rates than you’d get from a traditional CD. Even so, it’s easy to exchange a no-penalty CD for a higher-yield CD if market rates rise, because you’re not locked in.
How Does a No-Penalty CD Work?
Like a traditional CD, a no-penalty CD offers a fixed interest rate for a set period of time—usually three months to five years. But there are some differences. Here’s how it works:
- A no-penalty CD doesn’t charge early withdrawal penalties.
- You typically can withdraw funds from a no-penalty CD as early as six to seven days after opening your account.
- Once you remove funds from the CD, you can’t put the money back in.
Generally, no-penalty CDs are best for people who want to build savings but have the option to make withdrawals to cover unexpected expenses if needed. If you’re unsure whether you’ll need to access the money, it’s best to err on the side of caution and stick with a no-penalty CD. Otherwise, you might end up paying hefty fees to access the funds early.
Should I Choose a Regular CD or a No-Penalty CD?
It depends on your savings goals. If you value liquidity—the ability to withdraw your money without penalty—a no-penalty CD is a better choice than a regular CD. But if you can lock up your money, you’ll generally earn a higher APY on a regular CD.
How To Choose a No-Penalty CD
Before you choose a no-penalty CD, consider these factors:
- APY. The best no-penalty CDs have competitive annual percentage yields that keep your money safely growing.
- Compounding schedule. Look for a no-penalty CD with a daily compounding schedule. The faster your interest compounds, the more money you earn.
- Minimum deposit. Don’t stretch your budget to meet a minimum deposit requirement. Decide what you can contribute before you open a CD.
- Your goals. Choose the right account to suit your budget and your savings goals. CDs generally work well for short-term goals, such as saving for a new car or a vacation.
- Other options. You may get a better APY with a high-yield savings account or money market account. And you’ll have more liquidity. Consider all of your options before opening a no-penalty CD.
Pro Tip
With no-penalty CDs, you can transfer your balance to a new account if you find a competitor offering a better rate than the one you’re locked into. This is a good reason to keep an eye on the best interest rates currently available, which you can find in this list. Just remember that removing funds closes your CD.
Are No-Penalty CDs Safe?
Yes, no-penalty CDs are safe. No-penalty CDs, like other types of CDs, are insured by the FDIC (Federal Deposit Insurance Corporation) at banks up to $250,000 per depositor, per bank, for each account ownership category, in the event of a bank failure. The NCUA (National Credit Union Administration) insures CDs up to the same amount at federal credit unions and most state-chartered credit unions.
Pros and Cons of a No-Penalty CD
No-penalty CDs can come in handy, but they aren’t without their drawbacks.
Pros
- Allow for one penalty-free withdrawal
- Help you take advantage of the highest rates available
- Fixed interest for the length of the term
Cons
- Lower APYs than standard CDs
- Limited term lengths available
- Partial withdrawals not permitted
No-Penalty CD vs. Savings Account
While both no-penalty CDs and savings accounts are low-risk options for earning interest while saving, these accounts differ in a few important ways.
- APYs. You may earn a slightly higher rate with a no-penalty CD than with a high-yield savings account. But while savings account interest rates are variable, no-penalty CD rates are fixed.
- Withdrawals. Savings accounts offer more flexible withdrawals, letting you take out any amount of money up to six times a month without incurring a fee. With a no-penalty CD, you can only withdraw the entire balance, and this usually closes the account.
- Terms. No-penalty CDs are often available in terms of less than 12 months while savings accounts do not have terms.
Alternatives to No-Penalty CDs
- High-yield savings accounts. High-yield savings accounts offer APYs that are comparable to CD rates. The main difference is savings account rates are variable, meaning the rates aren’t guaranteed and may fluctuate over time.
- Traditional CDs. With traditional CDs, you receive guaranteed returns but sacrifice easy access to your money, since you must pay an early withdrawal penalty to access your money before the CD matures. However, traditional CDs may offer higher rates than their no-fee counterparts to compensate for this inconvenience.
- Money market accounts. Money market accounts are similar to savings accounts, except they come with checks and a debit card, making it even easier to access your money.
- High-yield checking accounts. These accounts usually have lower APYs than savings accounts but may make sense for any money you need to access on a regular basis.
CD Promotions for 2024
Are No-Penalty CDs Worth It?
No-penalty CDs can be valuable for individuals looking for guaranteed returns and the ability to access their money without consequences. Traditional CDs may offer higher rates if you’re able to keep your money locked up for the full term length, but if you need the flexibility to withdraw your funds at any time, no-penalty CDs are a worthwhile option.
Banks We Monitor
Forbes Advisor makes every effort to provide you with the best No-Penalty CD rates. In order to provide the most comprehensive financial product comparison, we monitor the following financial institutions to maintain this list:
ableBanking, Affinity Federal Credit Union, Alliant Credit Union, Ally Bank, American Express, Andigo Credit Union, Apple Federal Credit Union, Armed Forces Bank, Axos Bank, BancorpSouth Bank, Bank of America, Bank OZK, Bank5 Connect, BankDirect, BankPurely, BankUnitedDirect, Barclays, BB&T, BECU, Bethpage Federal Credit Union, Blue Federal Credit Union, BMO Harris, Bread Financial, BrioDirect Banking, Capital One, CFG Community Bank, Charles Schwab Bank, Chase, Chevron Federal Credit Union, CIBC Bank, CIT Bank, Citibank, Citizens Access, Citizens Bank, Colorado Federal Savings Bank, Comerica, CommunityWide Federal Credit Union, Connexus Credit Union, Consumers Credit Union, Credit Union of Denver, Discover, Dollar Savings Direct, EmigrantDirect, Exchange Bank & Trust, Fidelity, Fifth Third Bank, Financial Partners Credit Union, Financial Resources Federal Credit Union, First Citizens Bank, First Foundation Bank, First Horizon Bank, First Internet Bank, First National Bank & Trust, First National Bank of America, Georgia’s Own Credit Union, Golden1 Credit Union, Greenwood Credit Union, Hanscom Federal Credit Union, Heritage Bank, HSBC Direct, Hughes Federal Credit Union, Huntington Bank, Huntington National Bank, Ideal Credit Union, iGoBanking, Incredible Bank, Investors eAccess, Keybank, Kinecta Federal Credit Union, LendingClub, Limelight, Live Oak Bank, M&T Bank, MAC Federal Credit Union, MainStreet Bank, Marcus by Goldman Sachs, Michigan State University Federal Credit Union, My Banking Direct, My eBanc, MySavingsDirect, NASA Federal Credit Union, Nationwide Bank, Navy Federal Credit Union, nbkc Bank, Northern Bank Direct, Northpointe Bank, Nuvision Federal Credit Union, Pacific National Bank, Paramount Bank, Pen Air Federal Credit Union, PenFed, PNC Bank, Popular Direct, Presidential Bank FSB, PSECU, Quontic, Quorum Federal Credit Union, Radius Bank, Regions Bank, Rising Bank, SalemFiveDirect, Sallie Mae Bank, Santander, SchoolsFirst Federal Credit Union, Security Service Federal Credit Union, Service Credit Union, Spectrum Credit Union, Spectrum Federal Credit Union, State Bank of Texas, State Department Federal Credit Union, State Farm Bank, Superior Choice Credit Union, Synchrony Bank, TAB Bank, TD Bank, EverBank, TotalDirect Bank, Truist, U.S. Bank, Union Bank & Trust, USAA, USAlliance, Federal Credit Union, Vio Bank, VirtualBank, Webster Bank, Wells Fargo and Zions Bank.
Frequently Asked Questions (FAQs)
What are the highest no-penalty CD rates?
The highest no-penalty CD rates are currently over 4.00% APY. You can find the most competitive rates with USAlliance, CIT Bank and Ally Bank.
Are there different types of CDs?
There are several different types of CDs. Regular or traditional CDs are the most common. Banks and credit unions may also offer bump-up CDs, step-up CDs, no-penalty CDs or add-on CDs, to name a few variations.
What terms are no-penalty CDs available in?
No-penalty CD terms are typically available in terms ranging between six and 13 months, though some banks might offer shorter or longer terms. Term options for no-penalty CDs are usually limited and shorter than those for traditional CDs.
Can you take interest from a CD without penalty?
When you open a CD, the bank should ask whether you want to let the interest accumulate or have it paid out to you at a regular interval, such as quarterly or annually. When you withdraw money from a no-penalty CD, the bank will usually pay out money from both interest and principal—the original amount you invested. But you must wait at least seven days after the account was funded.
Why do no-penalty CDs have higher rates?
A no-penalty CD will earn you a higher interest rate than a regular savings account because you agree to keep your money in the CD for a set period of time. Even though you have the option to withdraw your money early without penalty, you can’t deposit and withdraw funds on a whim as you can with a savings account. Banks realize that tying up your money comes with risks, which is why they compensate you by paying a higher rate.
What is the difference between a high-yield CD and a no-penalty CD?
High-yield CDs pay above-average interest and are typically found at online banks and credit unions. No-penalty CDs are not considered high-yield since they pay lower rates in exchange for the flexibility of penalty-free withdrawals.