Today’s gnarly financial environment, with rising rates and a topsy-turvy market, means savers have to be judicious in where they put their money. You don’t want to be in a position where you need access to cash, but have to pay to get it.
No-penalty certificates of deposit (CDs) are a good solution: you can lock in a relatively high rate for many months, but still be able to get at your cache in case of an emergency, or to earn a higher interest rate, at any time without losing a dime due to an early withdrawal penalty.
We scoured more than 350 CDs, taking into account hundreds of data points, to find the best no-penalty options for you.
All rates and Annual Percentage Yields (APYs) are current as of May 17, 2023.
Best no-penalty CDs
Comparing the best no-penalty CDs
Choosing a no-penalty CD vs. a traditional CD
In many ways, a no-penalty CD is similar to a traditional CD. Both are savings products that offer interest earnings over a set period of time.
The appeal of a no-penalty CD however is that you won’t get slapped with an early withdrawal fee if you need to tap into your funds before the end of the CD’s term.
“It makes sense to pick a no-penalty CD instead of a traditional CD when you are not certain you can part from the money during that period of time,” said Gary Grewal, CFP and author of Financial Fives. “If you value the flexibility of withdrawing at any time, such as in case you find the perfect house, a no-penalty CD makes perfect sense.”
The catch is that no-penalty CDs tend to come with a lower interest rate than the best traditional CDs.
Finding the highest no-penalty CD rates
Whatever kind of CD you’re after, locking in the best interest rate is a big deal. You don’t want to leave money on the table.
Savers looking for the highest no-penalty CD rates can start their search with the top options outlined above. But don’t be afraid to go off the beaten track if you find an FDIC-insured option that offers a phenomenal rate.
To find the highest no-penalty CD rates:
- Shop around. The good news is that it’s easy to shop for the highest rates. A simple Google search can yield a whole list of the best CD rates. Taking a few minutes to shop around can make a big difference to your bottom line.
- Read the fine print. Every CD comes with detailed information about fees and rates. Don’t blindly accept the fine print without reading through the details. Pay attention to any fees tied to the CD. If you don’t like what you see, move on to another option.
- Be willing to work with a new bank. It’s unlikely that your current bank will be the one offering the highest interest rates; traditional brick-and-mortar financial institutions don’t need to offer competitive yields in order to gain consumer deposits. Consider branching out to tap into better rates.
- Confirm the bank is insured. A great interest rate should be paired with insurance from the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). If the financial institution isn’t insured, you’re putting your money at risk. It’s best to stick with banks that offer insurance.
If you get stuck trying to choose between a few CDs, consider CD laddering.
For example, imagine you purchase three CDs: in one-year, two-year and three-year terms. As each matures, you reinvest it into a three-year CD. This way, all of your funds are eventually in a longer-term, three-year CD investment, but you’re never more than a single year away from having access to a stash of your funds.
Benefits and disadvantages of a no-penalty CD
Every financial product comes with pros and cons. Let’s start by taking a look at the benefits:
- Flexibility. The major selling point of a no-penalty CD is that you have the opportunity to pull out funds without paying an early withdrawal penalty. If you run into an emergency or move up the timeline on a big purchase, you can move forward without worries.
- Locked-in rate of return. You don’t have to worry about changing interest rates lowering your overall earnings. Instead, you’ll know exactly how much your CD is scheduled to earn, which will only change if you withdraw funds early.
- Low risk. You can choose a no-penalty CD that offers insurance, protecting your total deposits for up to $250,000 at each institution.
And we can’t forget the disadvantages:
- Generally lower rates than traditional CDs. “It’s important to note that no-penalty CDs often offer lower interest rates than traditional CDs,” said Joseph Carpenito, a financial advisor at Materetsky Financial Group.
- Minimum balance requirements. Some no-penalty CDs require a minimum balance to get started. Depending on your situation, a minimum balance requirement could put a particular CD out of reach.
- Cannot reinvest funds. “One of the drawbacks to these CDs is that once you take the money out, you cannot put it back into the CD and start earning interest on it again,” said Howie Wu, general manager of CD Valet at Seattle Bank.
- Typically lower rates than other investment opportunities. While the stock market offers more risk, it also offers greater potential yields. The average annual return on the S&P 500 over the long term is about 10%. However, you can’t know what stocks will do over any given period of time.
Opening a no-penalty CD
Here’s what to do if you’ve decided that a no-penalty CD is the right fit for you:
Find the right CD
As you look at no-penalty CDs, keep these three things in mind:
- Interest rates. If possible, you’ll want to find the CD with the highest interest rate attached.
- Minimum deposit requirements. Find a no-penalty CD that offers a deposit requirement that suits your situation.
- Deposit insurance. You don’t want to accidentally open a CD that doesn’t come with FDIC or NCUA insurance. Coverage is limited to $250,000 at each insured institution, per depositor, per account ownership type.
- Terms. The most popular CD terms vary from six months to five years.
Apply for an account
Once you’ve found the right CD, it’s time to make it official. If you’re already a customer of the bank or a member of the credit union, you’ll simply need to log in online or go to a branch.
Here are some popular CD providers:
If you don’t already have an account, sign up for one. Be prepared to provide basic personal information about yourself: your name, date of birth, address, Social Security Number and contact details.
Fund the CD
If you’re doing the transaction in person, you’ll simply need to write a check or deposit cash. If you’re online, you’ll typically need to link another account to make a transfer. Have the routing number and the account number of your funding account ready.
If you run into any issues, reach out to the bank’s representatives.
Methodology
APY 60%
You invest in a CD to earn money. The greater the yield, the better.
But CDs haven’t been greatly desirable over the last three decades. In 2019, according to the Federal Reserve, just 8% of households owned a CD compared to a fifth of families just 30 years earlier.
A major catalyst in weaker demand for CDs was the Federal Reserve’s decision to cut interest rates to near zero following the Great Recession in order to stimulate the economy, and kept them there for years.
That trend turned in March 2022 after the Fed began to raise rates to moderate sky-high inflation, bringing them up to a range of 5.00% to 5.25% in early May 2023.
This has been great news for savers. As the Fed rate increases, so do deposit rates.
Learn more with our CD rate forecast.
And while no-penalty CDs typically have a lower rate than traditional CDs, they’ve still been buoyed up on the rising tide.
Customer service 12%
The point of accepting a lower rate in a no-penalty CD (compared to a traditional CD) is the ability to pull the funds early. If you do end up divesting your CD before its maturity, you want it to be a smooth process.
To this point, we looked at grades from the Better Business Bureau (BBB), rankings from J. D. Power and reviews from Trustpilot. CD providers with more positive customer experiences earned a higher score.
Minimum deposit requirement 11%
We believe you should be able to invest in a CD without putting down a small fortune.
While meeting a high minimum deposit may not be a problem for some, it can be more of a consideration for others, especially those investing in multiple CDs via a CD ladder or for whom CDs are a smaller part of their diversified portfolio.
Compound interest schedule 5%
The more frequently your funds compound, the more quickly they’ll grow. We rewarded no-penalty CDs with a compound interest schedule that ran forward rather than shuffled along. Continuously compounding interest is the golden standard. All of our picks have at least daily compounding interest that’s credited monthly.
Available terms 5%
Whether you’re in the market for multiple no-penalty CDs or just one, it’s good to have choices. The most popular traditional CD terms range from six months to five years, but no-penalty CDs tend to be more limited. We looked at how many no-penalty CDs providers offered and how far ranging their terms were.
Availability 5%
If you find out that the no-penalty CD of your dreams (the one with the highest yield) is only available in a state you don’t live in, that’s not helpful.
We checked what states were eligible for each CD, whether you had any branch access for in-person transactions; the number of branches and their locations; and, if membership was required, how strict it was.
Digital experience 2%
Tapping on a button five times, praying that the click will go through once (and only once) isn’t the best experience. We took the average rating (and the number of reviews) for the CD provider’s mobile app from both the Apple App Store and the Google Play Store into account.
Why some banks weren’t chosen
You may notice that some of the very largest banks in the country don’t have the best no-penalty CDs.
We rated CDs based on our methodology above. The largest banks were typically disqualified due to low APY. They don’t have the most competitive CD rates because they already have plenty of deposits. As they’re top-of-mind for many consumers, they don’t need to offer great rates to attract customers.
Relatively smaller financial institutions tend to offer the best CD rates as they want to make a splash, gain attention and earn customers.
Why trust us
Sarah Sharkey is a personal finance writer who enjoys diving into the details to help readers make savvy financial decisions. She covered mortgages, insurance, money management and more. She lives in Florida with her husband and dogs. When she’s not writing, she’s outside exploring the coast.
Jenn Jones is the deputy editor for banking at USA TODAY Blueprint. She brings years of writing and analytical skills to bear, as she was previously a senior writer at LendingTree, a finance manager at World Car dealerships and an editor at Standard & Poor’s Capital IQ. Her work has been featured on MSN, F&I Magazine and Automotive News. She holds a B.S. in commerce from the University of Virginia.
Frequently asked questions (FAQs)
The exact amount of an early withdrawal penalty varies based on the individual CD. In most cases, the early withdrawal penalty is equal to a period of interest payments. For example, you might have to forgo 90 days’ worth of interest if you tap into your CD early.
In some cases, you might have a grace period to withdraw funds without a penalty. Read the fine print attached to your CD to determine exactly what early withdrawal penalty is involved.
CD interest rates are rising. For example, based on data from the FDIC, the interest rate on a one-year CD increased from 0.17% to 1.54% year-over-year in April 2023. As a saver, monitoring the changing CD rates can help you make efficient choices for your funds.
No-penalty CDs are typically available in terms of 11 to 13 months. If you want a longer term, you could find one by shopping around or you could renew your CD at its maturity for as many times as you desire, although the rate will most likely fluctuate.
You can avoid a CD penalty by choosing to open a no-penalty CD. If you don’t want to open a no-penalty CD, you can avoid the early withdrawal penalty by sticking it out until the end of your CD’s term.
In some cases, you’ll have a grace period during which you can withdraw funds without a penalty. If you are looking for a loophole, consult the fine print of your CD. You’ll find any possible solutions outlined in those details.
