Avoiding Early Withdrawal Fees on CDs by Withdrawing Only Accrued Interest
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Avoiding Early Withdrawal Fees on CDs by Withdrawing Only Accrued Interest

Like many people who realized three or four years ago that interest rates were not going to go up at the time, I locked some money into 5-year CDs back then.

These CDs are now within a year or two of maturity. The early withdrawal fees on these are either 6-months’ interest or 12-months’ interest. As long as you don't need the cash, a quick calculation that most people can do in their heads shows that the penalty would be more than any additional yield that you can get and it therefore makes more sense to hold them until maturity.

Yet, as rates have risen, the interest that these CDs are now paying is a little lower than today’s best online savings rates and is quite a bit lower than current best online one-year CD rates.

All online banks that I am aware of will allow you to withdraw the interest that has accrued to the CDs without any penalty. While the release of accrued interest is not a transaction that can always be done online, I found that with some online banks it is a 2-minute phone discussion.

It releases a small part of the money in the CD, freeing that money to earn a higher rate.

Ari Socolow
Ari Socolow: Ari Socolow is the Chief Economist and Editor-in-Chief at BestCashCow. He is particularly interested in issues relating to bank transparency and the climate crisis. Since co-founding BestCashCow in 2005, Ari has been frequently cited in the media as an expert on local and national savings accounts, CD products, mortgage and loan products and credit card rewards products.

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Today's Highest Online CD Rates

Bank Product Term Interest Rate (APY)
CFG Bank 1-Year 5.40% APY with $500 minimum
TotalDirect, a division of City National Bank of Florida 1-Year 5.35% APY with $25,000 minimum
Navy Federal Credit Union 1-Year 5.30% APY with $50 minimum
Dollar Savings Direct, a division of Emigrant Bank 3-Year 5.00% APY with $1,000 minimum
First Internet Bank of Indiana 3-Year 4.66% APY with $1,000 minimum
IncredibleBank 3-Year 4.58% APY with $1,000 minimum
First Internet Bank of Indiana 5-Year 4.55% APY with $1,000 minimum
BMO Alto, a division of Bank of Montreal Harris 5-Year 4.50% APY with no minimum
Popular Direct 5-Year 4.35% APY with $10,000 minimum

See More Online CD Rates →

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