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CD Withdrawal Terms: What are Certificate of Deposit Withdrawal Terms?

CD Withdrawal Terms: What are common CD withdrawal terms?

CDs are a great way to build financial portfolios. Investors can gain money over time, as long as they keep their investments for the terms agreed. Investors who withdraw their money before maturity may find themselves losing a great deal of money in the process. It is always good to know what the original terms are before withdrawing money from CDs. Investors should also find CDs that fit their personal needs so that they do not have to pay expensive fees to withdraw their money.

CD Withdrawal Fees

CD early withdrawal fees vary by financial institution. Many of them follow the same rules for penalties. Those penalties include:

  • All interest on CD terms of 1-month, accrued or not;
  • 3 months interest on CD terms of 2 months to 18 months, accrued or not; and
  • Six months interest on CD terms of 2 years or more, accrued or not.

Withdrawing money before maturity may cost investors interest and principle in some cases. Financial institutions depend on their customers’ money to operate. Fees may be hefty to deter investors from withdrawing money before the maturity date.

Some banks have heftier fee for early withdrawal than those stated above. Those fees include:

  • 10 % of the amount withdrawn;
  • Half of the amount of the current and potential interest;
  • Half of the interest earned on the amount withdrawn; or
  • Fixed rate fees in addition to a percentage of the interest.

There are certain situations that allow investors to withdraw money from their CDs without penalties. These situations include:

  • Death of investors;
  • Mentally competency; or
  • Ownership of IRA CDs by investors who are 59 ½ years of age.

CDs offered by deposit brokers or purchased through brokerage firms do not have withdrawal penalties. Investors may want to do some research on these investments types to eliminate withdrawal fees.

Things to Look For When Viewing Certificate of Deposit CD Withdrawal Terms

  • Additional Withdrawal Fees – Some financial institutions charge an additional fee other than the accrued or non-accrued interest charged. For example, a financial institution may charge a $50 fee in addition to a percentage or fixed amount of interest to withdraw fees. The fees and the interest may cut into the principle amount that investors originally deposited. Investors must make sure that they are aware of these fees before opening CD accounts.
  • CD Withdrawal Fees That Affect Principle – People invest their money in CDs because they are safe investments. Investors are guaranteed to see returns on their principle, as long as they leave the money in the financial institution according to the agreed terms. Some banks write terms into the agreement that can cost investors some of their principle investment. Financial institutions that charge investors a percentage of their withdrawal amount pay more interest than has accrued. Investors lose some of their principle interest when this happens.
  • Terms That Charge Fees on Non-Accrued Interest – Non-accrued interest is the interest that CDs would have made if investors kept the money in the accounts for the full term. If investors see this feature in their terms, they should look for CDs in other places. Most people enter CD agreements with the full intention of keeping them it until maturity. When financial issues arise, investors want the option to withdraw their money that costs them the least amount of money.

Tips on Finding the Best Certificate of Deposit CD Withdrawal Terms

  • Invest in CDs at online or Internet banks. These financial institutions may not get much publicity because many people may not know that they exist. These financial institutions may offer more lenient withdrawal terms as a way to generate new business.
  • Search for terms online and locally before committing. Investors may be able to find better terms by taking time to search their options. Some financial institutions may offer higher rates but horrible withdrawal terms. Investors must not get too caught up in the rates because bad withdrawal terms can cost investors some of their principle investment.
  • Negotiate Withdrawal Terms – Investors with large investments may be able to negotiate their withdrawal terms. Financial Institutions want their money so they will do what they can to keep their business.
  • Try Personal Financial Institutions – Investors may be able to get the best withdrawal terms from their own personal banks. The personal relationships may play a role in whether investors receive the withdrawal terms that that want.

CD withdrawal terms are definitely something that investors need to look at before investing. Bad withdrawal terms may cost investors much of their beginning investment. Investors choose CDs because they are reliable ways to grow money. Investors must read all of the fine print in their agreements to prevent a potential financial disaster.

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