Saving up for a little something? 5 Benefits to a No Penalty CD



Saving up for a little something? 5 Benefits to a No Penalty CD

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With this rising rate environment, have you been considering opening a CD, but worried rates may increase more? Have you thought about a no penalty CD? Let’s start with the basics.

What is a no penalty CD? A certificate of deposit (CD) is a type of savings account that keeps money locked up for a set period, usually three months to five years. The longer the CD period, the higher the rate. A no penalty CD allows you to lock in a rate with the flexibility to withdraw your balance without a penalty.

When should you get a CD? CDs are a terrific way to save for a short-term goal such as buying a car or house in the next few years. CDs can also be a safe place for money when you want to get guaranteed returns without the risk associated with the stock market.

How does a no penalty CD work? Regular CDs require you to keep your money deposited in the CD account for a specific term—such as six, 12, or 60 months, whereas a no penalty CD gives you the flexibility to withdraw your money, without having to pay a penalty for early withdrawal.

No penalty CDs give you the safety and guaranteed APY of a traditional CD without the risk of an early withdrawal penalty. If you have a financial emergency during the CD’s term, or if you find something else in which you would like to invest the money during that time, you can access your money without penalty.

Ok now that we know what a no penalty CD is, let’s get into the details of the benefits:

  1. Flexibility

Is it smart to invest in a 24 month CD when rates are rising? No penalty CDs can be a good option if you want a traditional CD’s safety and stability but without the risk of early withdrawal penalties. Because we don’t charge an early withdrawal penalty for accessing money before the CD’s maturity date, no penalty CDs provide more flexibility and options for what you can do with your money. You can put your money into a no penalty CD and earn a guaranteed APY, but if you decide that you want to do something else with the money, or if you aren’t sure when you will need the money, you can easily withdraw your money and put it to work in other areas.

  1. Fixed Rates

Would a no penalty CD be a desirable alternative to a money market account? Yes, a no penalty CD gives you a fixed rate that you can rely on whereas the money market rates are variable. Our high yield no penalty CD rate is much higher than most money market accounts, and it gives you a similar liquidity as a money market or savings account.

  1. Safety

Are no penalty CDs safe? Yes, no penalty CDs are safe. No penalty CDs, like other types of CDs, are insured by the FDIC (Federal Deposit Insurance Corporation) at banks up to $250,000 per depositor, per bank, for each account ownership category. 

  1. Liquidity

Should I choose a regular CD or a no penalty CD? It depends on your savings goals. If you value liquidity—the ability to withdraw your money without penalty—a no penalty CD is a better choice than a regular CD.

  1. Guaranteed Returns

Why would I invest in a no penalty CD instead of the stock market?

  • FDIC-insured safety. No penalty CDs are a safe place to keep your money because they can be FDIC insured.
  • A guaranteed rate of return. No penalty CDs, like other CDs, generally pay a higher APY than a bank savings account.
  • Easy access to your money. No penalty CDs allow you to withdraw all your money during the term of the CD, with no penalty for early withdrawal.

Why are you waiting? No penalty CDs, in a way, offer the best of both worlds. You can potentially get a higher APY than you would earn with a regular savings account, while still having a similar level of flexibility and access to your money. Put your money to work and open a CD now. Want even more ways to earn interest? Check out an interest-bearing checking account like our Advantage Plus Checking.

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