Do No-Penalty CDs Exist Anymore?

Who does not want the best of both worlds when it comes to investing? If you want the financial security of a certificate of deposit, but the flexibility of accessing your money without the risk of early withdrawal penalties, a no-penalty CD might by just the thing for you.

Before getting into the details of a no-penalty CD, you’ll need to be fully informed as to what a CD actually is.

Certificate of Deposit Pros and Cons

A certificate of deposit is often considered a low risk investment opportunity, as your principal is typically safe because of FDIC or NCUA-insurance protection on each individual account up to $250,000.

The longer your CD, the higher interest rate you can garner. But if you touch the money prior to its maturity date, federal law mandates a forfeiture of a minimum of seven days of interest. Since there are no rules capping the maximum early withdrawal penalty, many banks and credit unions impose higher penalties for early withdrawal, at times as high as 90 days’ worth of earnings.

It’s for this reason that rare no-penalty CD accounts are so enticing to depositors. However, this benefits of such a CD option are not without its disadvantages.

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