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The best no-penalty CDs of May 2021
| Bank | APY | Minimum deposit | Next steps |
|
Ally |
$0 | ||
|
Goldman Sachs |
$500 | ||
|
CIT Bank |
$1,000 | ||
|
America First Credit Union |
$500 |
If you want to grow your money but keep it safe from the turbulence of the stock market, a certificate of deposit (CD) may be a good option.
What if you end up needing the money before your CD matures, though? If you’re worried about accessing your savings early, you may want to open a no-penalty CD. Unlike most CDs, no-penalty CDs let you take money out of your account without charging an early withdrawal penalty.
You also may want to consider a high-yield savings account rather than a CD if you want easy access to your cash. But the main perk of a no-penalty CD is that you’ll earn a fixed interest rate. If rates decrease in general, your savings account rate could also go down – but your no-penalty CD interest rate will stay the same.
No-penalty CDs aren’t very common, so you only have a few strong banks to choose from. Keep reading to learn more about your best options.
Learn more about our top picks
Why it stands out: Ally is the only institution on our list that doesn’t require an opening deposit, so you can open a CD with any amount.
Term length: 11 months
What to look out for: Types of CDs. Ally pays a good rate on its no-penalty CD, but you can earn higher rates with some of its other CDs. The
Why it stands out: Most banks only have one term length for no-penalty CDs. But Marcus offers multiple term options, making it easier to find one that’s a good match.
Term lengths: 7 months, 11 months, 13 months
What to look out for: Marcus’ no-penalty CD doesn’t have any major red flags. But if you’re looking for an 11-month term, you may find a slightly higher rate elsewhere.
Why it stands out: CIT Bank pays a competitive rate on its no-penalty CD.
Term length: 11 months
What to look out for: The main downside is that the
Why it stands out: America First Credit Union gives you more flexibility with deposits and withdrawals than most banks. Unlike other institutions, America First lets you continue depositing money into your CD after you’ve opened it, up to $10,000 per month. Many banks make you take out all your funds if you need to make an early withdrawal, but America First lets you make partial withdrawals.
Term length: 12 months
What to look out for: Compound interest. Like most credit unions, America First compounds your interest monthly rather than daily, which will limit how much you earn over time.
Which bank is the most trustworthy?
Here are the trustworthiness scores from the Better Business Bureau for each institution:
| Institution | BBB grade |
| Ally | C |
| Marcus by Goldman Sachs | A+ |
| CIT Bank | A- |
| America First Credit Union | A+ |
The BBB measures trustworthiness by looking at customer complaints, honesty in advertising, and transparency about business practices. Right now, Ally has a C because it has a relatively high number of complaints on the BBB website.
Of our top picks for no-penalty CDs, CIT Bank is the only one with a recent public scandal.
In 2019, the Department of Housing and Urban Development sided with the California Reinvestment Coalition in its allegations against a division of CIT Bank called OneWest Bank. The CRC claimed that OneWest discriminated against Latinx and Black people in Los Angeles. Although OneWest never admitted to the discrimination, the bank did agree to pay over $7 million to homeownership programs for racial minorities in LA.
If this issue worries you, you may decide you’d rather bank with another company.
Frequently asked questions
Why trust our recommendations?
Personal Finance Insider’s mission is to help smart people make the best decisions with their money. We understand that “best” is often subjective, so in addition to highlighting the clear benefits of a financial product or account – a high APY, for example – we outline the limitations, too. We spent hours comparing and contrasting the features and fine print of various CDs so you don’t have to.
What is a CD?
A CD, or certificate of deposit, is a time-sensitive savings account that usually holds your money at a fixed interest rate for a specified period of time. If you don’t need immediate access to your savings, a CD can guarantee a return on your money since you lock in a fixed APY for the term of the CD.
With most CDs, you typically won’t be able to deposit more money or access your funds before the CD matures without paying a penalty. No-penalty CDs are the exception to this rule (more on that below).
You will, however, earn interest on the amount and have the option to collect those payments monthly or reinvest them into your CD. Most banks offer varying rates for different terms and deposit amounts – in many cases, the longer the term, the higher the rate.
At the CD’s maturity date, you’ll typically have a 10- to 14-day grace period in which you can withdraw your money and close the account or renew the term.
What is a no-penalty CD?
With regular CDs, otherwise known as “term CDs,” the bank charges you a penalty for withdrawing money before your CD term is over. Banks typically charge the interest you’ve earned over a certain amount of time. For example, a bank might charge 90 days interest for a 6-month CD, and 180 days interest for a 1-year CD.
With a no-penalty CD, you can withdraw money without paying an early withdrawal penalty. The catch is that most banks require you to withdraw your entire balance – you can’t just take out what you need and leave the rest.
In most cases, you must wait at least seven days after opening the CD to withdraw funds with no penalty.
How much do early withdrawal penalties usually cost?
Every institution charges different early withdrawal penalties. You’ll pay the interest that’s accumulated over a certain amount of time, or the interest that would accumulate over that chunk of time if your account hasn’t been open very long.
Banks typically charge higher early withdrawal penalties for longer terms. A bank might charge 90 days interest for a 3-month term and 365 days interest for a 5-year term, for instance.
It’s common to pay between 90 and 365 days interest as an early withdrawal penalty, but a bank may charge less or more in interest.
How do CD rates work?
Most CDs lock in your rate for the entire term. For example, if you open a 1-year CD at 0.60%, you’ll earn 0.60% for the entire year. If you renew your CD after it matures, you’ll earn the new rate available in a year.
There are exceptions to the fixed-rate rule. Some institutions offer variable-rate CDs or CDs that allow your rate to change after a predetermined amount of time.
Which is better, a no-penalty CD or a regular CD?
Each has its pros and cons, so it depends on what you want out of a CD.
No-penalty CDs can be good accounts if you’re worried about needing money before the CD matures. This way, you won’t have to pay a penalty if you take out money early.
You have limited term length options for no-penalty CDs, though. If you want to open a CD for a longer amount of time – and usually earn a higher interest rate as a result – you’ll want to open a regular CD. You can also open term CDs with shorter terms than no-penalty CDs offer, which could be a good option if you suspect you’ll need money in a few months.
Which is better, a no-penalty CD or a high-yield savings account?
The choice between a no-penalty CD and high-yield savings account will depend on several factors.
For easy, frequent access to your savings, you’re better off choosing a savings account than a CD. A no-penalty CD doesn’t charge you for withdrawing money, but institutions limit how often you can take out cash. In most cases, you have to withdraw all your funds if you want to access money early.
On the plus side, a CD locks in your rate for the entire term. This could work to your advantage, because savings interest rates have been dropping. By choosing a CD, you aren’t affected by fluctuating rates.
Is a no-penalty CD a good place to store an emergency fund?
Yes and no.
A no-penalty CD is a better place to keep emergency savings than a term CD, because you won’t have to pay a fee to withdraw money should you find yourself in an emergency.
But a high-yield savings account is probably better for an emergency fund than a no-penalty CD. With a savings account, you can take out money up to six times per month, and some banks are extending that limit during the coronavirus pandemic. Many no-penalty CDs also require you to withdraw all your money if you need funds early. But with a savings account, you can just take out what you need and leave the rest in the account to continue earning interest.
You may even prefer a money market account as an emergency savings tool. Unlike savings accounts, money market accounts usually come with paper checks or a debit card. This makes it even easier to access your savings quickly in case of an emergency.
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