Understanding the Implications of Early CD Withdrawals
Thursday, 9 May 2024, 20:00
Implications of Early CD Withdrawals
Many investors consider opening a CD due to favorable rates, but early withdrawals can incur penalty fees.
Penalties for Early Withdrawal
- Earning high rates with a CD can be restrictive; withdrawing early may lead to penalties.
- The penalty amount depends on the CD rate, interest charges, and withdrawal amount.
Cost of Early Withdrawal
- For a $1,000 investment in a 5% 12-month CD withdrawn after six months, expect a penalty of about $12.20.
- If the CD term is longer, like a 5-year CD, the penalty may increase to $24.40 for a $1,000 withdrawal.
Avoiding Penalties
To bypass fees, refrain from investing emergency funds in CDs. Opt for no-penalty CDs or evaluate if taking the penalty for a better rate or financial needs is worthwhile.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.