CDs With No Early Withdrawal Penalty: Which Banks Have the Best Rates?

A traditional CD can be a great way to earn a guaranteed interest rate, but it locks up your money for the length of the term. I’ve been careful about putting money in one for this reason since I’d rather not pay a steep early withdrawal penalty if an emergency comes up and I need that money right away.

But with a no-penalty CD, you get the best of both worlds: a guaranteed interest rate for the CD term with the flexibility to withdraw funds early without penalty. While they’re not available at every bank, some of the best no-penalty CDs are offered by traditional banks like Bank of America and online-only banks like Ally Bank and Marcus by Goldman Sachs.

While no-penalty CDs can be helpful, they do have some drawbacks. For example, the annual percentage yield (APY) is often lower than that of more traditional CDs. Additionally, they usually have the same or similar minimum balance requirement, which can be higher than high-yield savings accounts.

I’ll detail some available CDs with no early withdrawal penalty below with the pros and cons of using each one to grow your savings.

How we evaluate products

The companies we chose for our best no-penalty CD list may be current or past FinanceBuzz partners. We did not review all no-penalty CDs in the market. When evaluating these companies, we considered factors such as the APY and the strength of the institution.

The 7 best CDs with no early withdrawal penalty

• Ally Bank
• CIT Bank
• Bank of America
• Marcus by Goldman Sachs
• America First Credit Union
  
• Climate First Bank
• USAlliance Federal Credit Union

Best no-penalty CD comparison

Institution	Minimum deposit	Term	APY
Ally Bank	$0	11 months	4.00% (as of 06/26/24)
CIT Bank	$1,000	11 months	3.50% (as of Sept. 3, 2024)
Bank of America	$1,000	12 months	4.25% (as of Sept. 3, 2024)
Marcus by Goldman Sachs	$500	7 months	4.70% (as of 07/01/24)
America First Credit Union	$500	12 months	4.85% (as of Sept. 3, 2024)
Climate First Bank	$500	12 months	5.00% (as of July 11, 2024)
USAlliance Federal Credit Union	$500	11 months	4.45% (as of Sept. 3, 2024)

Ally Bank No-Penalty CD 

4.00% (as of 06/26/24) APY

Ally Bank is an online-only institution frequently found on lists of the best banks for high-yield savings products.

Its no-penalty CD pays a 4.00% (as of 06/26/24) APY, which is the interest rate earned on your principal balance over a year. It has an 11-month term and no minimum deposit requirement, which is less common for CDs. Ally currently pays this APY on any no-penalty account balance.

While you can’t add more money to the no-penalty CD until it matures, Ally Bank lets you withdraw your entire account balance and any interest earned after the first six days of account funding. However, you can’t take partial withdrawals.

This bank provides a loyalty reward if you renew your CD after the 11-month term ends. While the reward varies, it’s currently 0.05%. This renewal is automatic unless you choose another option during the 10-day grace period.

Visit Ally Bank | Read our Ally savings review

CIT Bank No-Penalty CD 

3.50% (as of Sept. 3, 2024) APY

CIT Bank offers a 3.50% (as of Sept. 3, 2024) APY with its 11-month no-penalty CD – one of the lowest on our list. It has a relatively high opening deposit of $1,000, and the bank doesn’t mention any option for making additional deposits.

This account doesn’t have penalties for accessing your money after the initial seven days of account funding. Additionally, the CD automatically renews by default unless you change the options during your 10-day grace period at maturity.

If your balance is under $5,000, the no-penalty CD earns significantly more interest than CIT’s Platinum Savings account. While the no-penalty CD earns 3.50% (as of Sept. 3, 2024), the CIT savings account pays only 0.25% (as of 07/22/24) unless your balance exceeds $5,000, when it starts to earn 4.85%.

If you’re already a customer of CIT Bank, the no-penalty CD might be a good choice to earn extra interest without too much hassle. But if you’re looking for a new bank, you can find higher rates at another institution.

Visit CIT Bank | Read our CIT savings review

Bank of America Flexible CD 

4.25% (as of Sept. 3, 2024) APY

The Bank of America 12-month flexible CD offers a 4.25% (as of Sept. 3, 2024) APY on balances of up to $1 million. It requires a $1,000 minimum deposit and doesn’t allow additional deposits after account funding.

Money in the flexible CD is available for withdrawal without penalty after the first six days of funding the account or six days after a partial withdrawal. If you have to withdraw funds within those six days, you’ll forfeit seven days' worth of interest. Your principal will make up the difference if you haven’t earned enough interest to meet the penalty.

If you choose Bank of America, be aware that when it reaches its full term, the flexible CD will automatically renew into a nine-month flexible CD at a much lower rate (currently 0.01%). However, you can make changes within the seven-day renewal grace period.

Visit Bank of America | Read our Bank of America review

Marcus by Goldman Sachs No-Penalty CD 

4.70% (as of 07/01/24) APY

Marcus by Goldman Sachs is an online-only bank with several savings products, including no-penalty CDs. They offer a 4.70% (as of 07/01/24) APY on any balance for terms of 7, 11, or 13 months. The account requires a $500 minimum deposit and doesn’t let you add more money after you’ve made a deposit reaching at least that amount.

The account allows full balance withdrawals after the first seven days after opening. It will also automatically renew at maturity unless you direct Marcus to take a different step during your 10-day grace period.

If you already have a high-yield savings account through Marcus (currently paying 4.40% (as of 07/22/24)), a no-penalty CD may be a good way to earn extra interest on funds you don’t need immediately.

Visit Marcus by Goldman Sachs | Read our Marcus online savings review

America First Credit Union Flexible Certificate 

4.85% (as of Sept. 3, 2024) APY

America First Credit Union’s 12-month flexible certificate account offers a 4.85% (as of Sept. 3, 2024) APY. It requires a $500 minimum deposit and balance, and it allows additional deposits of up to $10,000 per month (limited to a total balance of $100,000 across your flexible certificates).

One drawback is that it restricts you to one penalty-free quarterly withdrawal within the first five calendar days of the quarter. Still, the higher APY and the ability to add funds throughout the CD term make it an attractive choice. America First also lets you opt to automatically renew the CD.

To get this account, you’ll need to meet America First’s membership requirements. Its branches are in select states, including Nevada, Idaho, Utah, California, New Mexico, Oregon, and Arizona.

Visit America First Credit Union

Climate First Bank Flex CD 

5.00% (as of July 11, 2024) APY

Offering a 6-month no-penalty CD paying a high APY of 5.00% (as of July 11, 2024) with a $500 minimum deposit, Climate First Bank is an intriguing option for people looking for a safe way to grow their savings and help the earth.

As its name implies, the bank was founded to help combat climate change. It is insured by the Federal Deposit Insurance Corporation (FDIC) and offers a one-time rate increase during the term of the CD if the same account’s interest rate goes up. Climate First also allows you to add money to your CD in increments of $100, up to one-half of your initial principal balance.

However, the Climate First Flex CD only allows one withdrawal of up to half the initial balance without penalty during the 15-month term. You can withdraw the remaining funds or renew the CD at maturity, though a different APY may apply.

Visit Climate First Bank

USAlliance Federal Credit Union No-Penalty CD 

4.45% (as of Sept. 3, 2024) APY

USAlliance Federal Credit Union offers several CD terms, including an 11-month no-penalty option with a 4.45% (as of Sept. 3, 2024) APY. This no-penalty CD has a $500 minimum deposit requirement, but USAlliance doesn’t mention allowing additional deposits.

You have to wait until the account has been opened seven days before you can make a withdrawal, which must be your full account balance. If you let the CD mature, it will automatically renew by default unless you act during the seven-day grace period.

USAlliance's physical locations are in Massachusetts, New York, New Jersey, and Connecticut. However, if you open an account online, you can still access the higher rates from anywhere in the country. There is also a co-op shared branch network that serves USAlliance’s customers.

Visit USAlliance Federal Credit Union

Pros and cons of no-penalty CDs

A no-penalty certificate of deposit lets you earn a reliable interest rate while having easier access to your money than with a standard CD. While standard CDs may earn better rates, they often penalize you for withdrawing money before the CD term is complete. These penalty amounts can differ by bank but generally equal several months' earned interest.

Let's use the Marcus by Goldman Sachs no-penalty CD as an example. If you deposit $1,000 and earn a 4.70% (as of 07/01/24) APY with an 11-month term, you’ll earn nearly $43 in interest if the cash remains until the end of the term.

If you instead choose a fixed 12-month CD from Marcus and deposit $1,000, the APY would be 5.15% (as of 07/01/24), and you would earn around $48 in interest. This seems like a no-brainer since the fixed CD earns more, especially if you have more than $1,000 to deposit.

However, if you need to withdraw your principal during the 12-month term, your penalty is 90 days' simple interest on the principal balance. You’ll also lose future interest on the amount withdrawn.

If you withdrew funds with six months left on the standard CD term, you’d lose $11.72 as the penalty and another $24.06 in future interest, for a combined total of $35.78 lost. If you choose a longer-term CD or have a bigger balance, your penalty would be even higher.

No-penalty CDs vs. high-yield savings accounts

No-penalty CD	High-yield savings account
No-penalty CDs earn a guaranteed interest rate over the term of the CD. No-penalty CDs may be harder to find than high-yield savings accounts. You often can’t add money to a no-penalty CD after the initial deposit. You usually must withdraw your entire balance from a no-penalty CD.	Interest rates on high-yield savings accounts vary and will change over time. High-yield savings accounts are more readily available from traditional and online-only banks. High-yield savings accounts generally have a lower (or no) minimum balance requirement. High-yield savings accounts allow multiple withdrawals per statement period (depending on your bank's rules).

While using a no-penalty CD instead of a high-yield savings account can be a wise choice in some instances, weighing the pros and cons of each option is essential.

A high-yield savings account gives you greater flexibility because you can withdraw your money as needed, depending on your bank's rules, and make ongoing deposits, earning more interest.

For example, a Marcus by Goldman Sachs high-yield savings account pays a 4.40% (as of 07/22/24) APY with no minimum deposit required. With an initial deposit of $1,000 and no additional deposits, you’d earn about $44 in interest by the end of a year. The interest earned is comparable to the 11-month no-penalty CD, which earns around $43, and you have greater access to the funds.

But while the interest rates on high-yield savings accounts are currently much higher than the national average for traditional savings accounts, they are variable and can change anytime.

For most people, using a high-yield savings account for money that may be needed right now makes more sense. But if you have a flush emergency fund and can spare the extra cash for the life of a CD, a no-penalty CD could help you earn more interest while giving you an option if you need that money sooner than expected.

How to choose a no-penalty CD

If you decide a no-penalty is right for you, consider the following as you research banks.

• High APY: The higher the APY, the more interest you’ll earn over the CD term. While it does take me extra time, I prefer comparing account rates at several banks so I don’t miss out on getting the best return on my savings.
• Minimum balance requirements: Most no-penalty CDs require a minimum balance of $500 or $1,000, so pick a bank with a minimum balance you can comfortably meet. I try to open CDs that don’t have a minimum requirement – like the offerings from Ally – since I like the flexibility they give me for allocating funds to multiple high-rate accounts.
• Available Terms: No-penalty CD term lengths tend to vary between seven to 15 months, even with the early withdrawal option, so consider how long your funds will be tied up before you open an account.
• Withdrawal limitations: Read the account disclosures and fine print to know what you’re signing up for. Understand the account's withdrawal limitations, such as only one per quarter or no partial withdrawals. Plus, make sure you can manage until at least the six or seven days’ wait time required for penalty-free early withdrawals.
• FDIC or NCUA insurance: Protect your investment by ensuring any account you open is with an FDIC-insured bank or an NCUA-insured credit union.

High-yield savings accounts

Another way to avoid tying up your funds while still earning interest is to put them in a high-yield savings account. Here are a few I recommend. 

FAQ

Bottom line

Finding the right no-penalty CD can help you earn a fixed interest rate over a short term. I especially like USAlliance Federal Credit Union, Marcus by Goldman Sachs, and Climate First Bank since they offer the best rates if you meet the minimum deposit requirements. I also recommend Ally Bank because of its relatively high APY and no minimum balance requirement.

While no-penalty CDs are a good tool, keep in mind that they shouldn’t be your primary savings vehicle. It’s wise to keep your emergency fund in an easily accessible high-yield savings account and use no-penalty CDs to supplement your savings. You should also consider whether higher-paying traditional CDs with shorter terms make sense.