CD Early Withdrawal Penalty Calculator: Are Penalties for Breaking a CD Worth It?

Certificates of deposit (CDs) are considered safe and worthwhile investments because they are typically protected by federal deposit insurance and earn higher interest rates than most traditional savings accounts. But they have one big downside: the early withdrawal penalty. Keep reading to learn what this fee is, how it’s calculated and how to avoid it.

To use our early withdrawal penalty calculator, you should have the following details for your CD:

• CD term (in months): You’ll need to know the term of your CD, which could be a few months to many years. If you don’t remember the length of your term, you can find it in your account agreement or by calling your bank’s customer service line.
• Deposit amount: This is the amount of money you added to the CD when you opened it.
• APY: A CD’s annual percentage yield (APY) is the interest you earn on the money in the account over the course of a year, expressed as a percentage.
• Early withdrawal penalty: Penalties vary by bank and should be listed in your account documents. Early withdrawal penalties typically involve giving up a certain number of months in interest earnings, such as three or six months’ worth.

Once you have this information, click the “Calculate” button on the calculator.

What is an early withdrawal penalty for breaking a CD?

When you open a certificate of deposit (CD), you’ll choose the maturity term, which is the length of time you agree to keep the money invested in the account. Essentially, you promise the financial institution that it can hold your money for that duration in exchange for the interest you’ll earn on your investment.

Once the paperwork is signed and if you withdraw your money from the account early, you’re effectively breaking your promise to keep the funds in the account. As a result, many banks and credit unions charge a fee — known as an early withdrawal penalty — to minimize those losses.

How CD early withdrawal penalties are calculated

While early withdrawal penalties on CDs are federally regulated, the Truth in Savings Act (Regulation DD) sets minimums on the amount of interest the bank can charge for this fee. However, it’s important to note that no maximum limit is set.

Here are some of the criteria that may affect how much you pay:

• Financial institution: Each bank or credit union sets its own early withdrawal penalties. Before opening a CD, be sure to research how much you could be charged if you need to access your money early.
• Maturity term: The length of time you are contracted to keep your money in the CD also matters. As a rule of thumb, the longer your intended maturity term is, the higher your fee will be.
• Annual percentage yield (APY): The amount of interest you earn on your CD can also affect the penalty. Usually, this penalty is expressed as a set number of days of interest earned, such as 90 days or 120 days of interest.
• Partial withdrawal capability: Some banks allow you to withdraw only a portion of the money in your CD and will charge a fee based only on the amount withdrawn. However, others may require you to withdraw the full amount.

Early withdrawal penalties from major banks

To give you a better idea of what to expect, here are some examples of early withdrawal penalties from major banks.

Financial institution	1-year CD	5-year CD
Ally Bank	60 days of interest	150 days of interest
PNC Bank	180 days of interest on the amount withdrawn	180 days of interest on the amount withdrawn
Chase Bank	180 days of interest	365 days of interest
Wells Fargo	90 days of interest	365 days of interest
American Express	270 days of interest	540 days of interest

Compare the best 5-year CD rates at top banks today.

When is paying an early withdrawal penalty worth it?

While everyone’s financial situation is different, there are some instances in which paying an early withdrawal penalty may be worth the fee. Here are a few examples:

• Emergency expenses: If you don’t have an emergency fund and an unexpected expense arises, you may need to break your CD to cover those costs.
• Putting the money toward a down payment: If you need to use the money to reach a larger financial goal, such as buying a house, it could be worth withdrawing your CD, especially if putting down more money can help you secure a lower interest rate on your home loan.
• Better investments: If you find an investment with a much higher yield, it could be worth shifting your funds to get those returns.
• Account closure: If you forgot to close your CD at maturity and it automatically renewed — as is often the case — it might be worth paying the fee to access those funds for specific purposes. To avoid this situation, make sure to confirm in advance that the CD will be closed at maturity.

How to avoid paying an early withdrawal penalty

If you don’t want to risk facing an early withdrawal penalty, here are some strategies to avoid it altogether.

Build a CD ladder

Many people diversify their CD investments by laddering CDs. This financial technique involves investing in multiple CDs, each with a different maturity term. It gives you more security by creating a scenario in which one of your CDs will always be close to maturity in case you need to access some funds. It also helps you take advantage of varying interest rates.

Choose a no-penalty CD

If you can’t ladder your CDs and still want to be able to access your funds at any time, you could consider no-penalty CDs. That said, there is one downside: No-penalty CDs typically offer lower rates than traditional CDs. You’ll need to weigh whether the flexibility is worth a lower rate. See our list of the best no-penalty CD rates.

Avoid investing money you need to access

Remember that when you invest in a CD, you make a commitment to the bank to leave the funds in place for a set period of time. If you think you’ll need to access the funds in the CD before its maturity term is up, a CD may not be the best financial product for you right now.

You may want to consider placing your money in a high-yield savings account (HYSA) or money market account (MMA) instead. While some of these accounts may come with transaction limits, they’re designed to allow you to access your funds as needed.