No-Penalty CDs Flexible Savings Options

No Penalty CDs: A Good Idea for Your Savings?

If you have a little emergency fund, you may be thinking about what to do with it. Sure, a regular savings account is safe, but the tiny interest rate is laughable. A no-penalty CD could be a great option for your emergency fund. With a no-penalty CD, you can earn higher interest rates than a savings account but still withdraw your money without fees if an emergency strikes.

What Are No-Penalty CDs?

No-penalty CDs, also called liquid CDs, allow you to withdraw your money without paying fees. They work the same as regular certificates of deposit. No-penalty CDs work just like regular CDs, except you can withdraw money early without a penalty with CDs. 

So you can withdraw cash before the CD period finishes without losing interest. For example, you might use a no-penalty CD to save for a down payment on a house but still want to access the money if needed for an emergency.

Is Purchasing a No-Penalty CD a Good Idea?

No-penalty CDs are a great option when looking for a secure spot to store your emergency fund or short-term savings. They still provide liquidity but give higher interest rates than savings accounts. You don't have to worry about paying fees or losing interest when you take your money out at any moment.

Since you can take early withdrawals, no-penalty CDs usually have lower rates than conventional CDs. But the trade-off in lower rates can be worth it for the liquidity. The specific terms, like interest rates and minimum deposits, will vary between banks and credit unions that offer these accounts.

You may need access to no-penalty CDs that strike a good balance between risk and reward to earn interest on money. They provide more return than a standard savings account without the locked-in terms of a traditional CD. No-penalty CDs can be a win-win for your emergency fund or any short-term savings goal.

How to open No-Penalty CDs?

Opening a no-penalty CD is pretty straightforward. Here are the basic steps:

Research your options

Research the best no-penalty CD rates and terms currently available at different banks and credit unions. Compare things like interest rates, minimum deposits, and penalties for early withdrawal. Look for CDs with no early withdrawal fees to access your money in an emergency without penalty.

Fund your account

Once you choose an institution and CD option that suits your needs, open an account and fund it with the minimum deposit amount, typically $500 to $25,000. You'll want to deposit enough to earn a good interest rate but still have access to it in a pinch.

Lock in your rate.

The interest rate you choose when you open your CD will be the same for the duration of the CD, whether it is six months or five years. Make sure your rate is competitive. Longer terms increase rates but delay penalty-free withdrawals.

Track your CD

Be sure to note when your CD will mature so you can withdraw your money without penalty or roll it over into a new one. Most banks will send you maturity and rollover reminders. But set a calendar alert yourself as well, just to be safe.

After following these steps, you may quickly earn interest on your emergency fund and rest easy knowing you can access it if needed.

Our Top 5 Picks for the Best No Penalty CDs

You want a decent interest rate and low fees when looking for a no-penalty CD. Here are five of the top options to consider:

  1. Ally Bank is one of the leading online banks, and their no-penalty CD offers a competitive rate with no fees. You can open an account with just $500, and the interest compounds daily, so your money can grow faster. If rates go up, you can increase once during the term.

  2. Barclays Online Savings offers no-penalty CDs with no monthly fees or minimum balance requirements. Rates are higher than the national average, and you only need $1 to open an account. They allow rate bump-ups and early withdrawals with no fees.

  3. Synchrony Bank, formerly GE Capital Bank, provides no-penalty CDs with highly competitive rates, no monthly service fees, and a low $2,000 minimum deposit. They are a reputable bank and part of the FDIC program. You can withdraw money or close the CD early with no penalties.

  4. Marcus by Goldman Sachs, one of the top high-yield savings providers, offers no-penalty CDs with rates that often beat the national average. There are no requirements for monthly fees or minimum balances. They provide an easy online application, highly rated customer service, and are fully FDIC-insured for up to $250,000.

  5. Allmerica Financial's No-Penalty CD from Hanover Insurance Group provides competitive rates with a $500 minimum deposit and no monthly fees. They allow unlimited free withdrawals and rate increases. They are rated A by A.M. Best and have been in business since 1852.


Even if interest rates are low, these accounts will ensure your money stays safe and easy to access when unexpected things happen. These choices provide peace of mind that your emergency fund is paying interest and ready to withdraw without fees or penalties. After seeing all the options, choose the best one and save it for emergencies. Low rates make every bit of interest count. Your emergency fund has your back—open that no-penalty CD and relax.

Suggested Articles:

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24 Oct, 2023


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