A CD (Certificate of Deposit) early withdrawal penalty is a fee imposed by the financial institution when an account holder withdraws funds from a certificate of deposit before the maturity date. CDs are time deposits with a fixed term, during which the funds are expected to remain in the account. If you withdraw money from a CD before the agreed-upon maturity date, you typically incur an early withdrawal penalty. What is a CD early withdrawal penalty
The specific terms of the penalty can vary depending on the financial institution and the terms of the CD agreement. Commonly, the penalty is a percentage of the interest earned or a set number of months' worth of interest. In some cases, the penalty might even involve a portion of the principal amount.
It's crucial to be aware of the early withdrawal penalties associated with a CD before opening the account to avoid unexpected fees. These penalties serve as a deterrent to withdrawing funds early and are designed to encourage account holders to honor the agreed-upon term of the CD. If you think you may need access to your funds before the CD matures, you should carefully consider the terms and conditions of the CD and explore other more flexible savings options.
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