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A certificate of deposit (CD) can be a great place to store your short-term savings. These accounts often have higher annual percentage yields (APYs) than standard savings accounts, though they might be lower than or on par with the best high-yield savings accounts. With a CD, though, you can’t access your funds for a set time—if you withdraw before the maturity date, you’ll pay a penalty, and those fees could offset or negate your earnings.

But if rates rise due to inflation and higher rates become available elsewhere, it might make sense to break your current CD and start from scratch. Here are three questions to ask before you decide.

Recommended High-Yield Savings Accounts

Bank Account APY Features Learn More
UFB Direct logo

UFB Direct Secure Savings Account

5.25% More Info

UFB Direct breaks balances into five tiers, but, currently, there is only one interest rate.

No minimum deposit
No monthly fee

SoFi Checking and Savings

0.50% - 4.60% More Info

Customers earn 4.60% APY on savings balances when they set up recurring monthly direct deposit of their paycheck or benefits provider via ACH deposit. Alternatively, deposit at least $5,000 each month to earn 4.60% APY on your savings balance. Checking balances earn 0.50% APY

No minimum deposit
No monthly fee

CIT Bank logo

CIT Bank Platinum Savings Account

5.05% More Info

Earn 5.05% APY on balances over $5,000. Balances of less than $5,000 earn 0.25% APY. Annual Percentage Yield is accurate as of July 27, 2023. Interest rates for the Platinum Savings account are variable and subject to change at any time without notice.

$100 minimum deposit
No monthly fee

CIT Bank logo

CIT Bank Savings Connect Account

4.65% More Info

Annual Percentage Yield is accurate as of July 27, 2023. Interest rates for the Savings Connect account are variable and subject to change at any time without notice.

$100 minimum deposit
No monthly fee

1. What Will the Early Penalty Cost?

With most certificates of deposit, making a withdrawal before your CD matures results in a penalty. (No-penalty CDs are the exception to this rule.) The cost of the early withdrawal penalty a bank charges, however, can vary based on several factors.

Early withdrawal penalties are not the same at every bank. These charges may also differ between types of CDs at the same bank. For example, CIT Bank charges three months of simple interest for terms of up to one year, six months of simple interest for terms of one to three years, and 12 months of simple interest for terms greater than three years.

CIT Bank Term Certificates of Deposit

Open CD

Member FDIC

  • Our Rating 3.5/5 How our ratings work Read the review
  • Minimum
    Deposit Required
    $1,000
  • 1 Year APY0.30% More Info

    Annual Percentage Yield is accurate as of March 31, 2023. Interest rates for CIT Bank's term CDs are variable and subject to change at any time without notice

  • 3 Year APY0.40% More Info

    Annual Percentage Yield is accurate as of March 31, 2023. Interest rates for CIT Bank's term CDs are variable and subject to change at any time without notice

  • 6-Month APY5.00% More Info

    Annual Percentage Yield is accurate as of March 31, 2023. Interest rates for CIT Bank's term CDs are variable and subject to change at any time without notice

Many banks that offer CDs require customers to commit to lengthy terms of several years or more in order to earn the highest interest rates available. However, with CIT Bank's term CDs, the opposite is true. To get the best rates at CIT, you'll need to open one of its shorter-term CDs, such as its 6-month CD that pays 5.00% APY. If you want an easy way to save more money without having to wait years, CIT Bank's term CDs are a solid option.

Overview

If you’re looking for a dependable way to earn interest on your money in the short term, CIT Bank’s certificates of deposits may be an excellent choice for you. However, those looking to open a long-term CD may be better off looking elsewhere.

Pros

  • Strong rates for 13- and 18-month terms
  • FDIC insured

Cons

  • Rates for longer terms unimpressive

Below is an overview of CD early withdrawal penalties at a variety of popular banks.

Financial Institution 1-Year CD (Early Withdrawal Penalty) 5-Year CD (Early Withdrawal Penalty)

Ally Bank

60 days of interest

150 days of interest

Capital One

3 months of interest

6 months of interest

Discover® Bank

6 months of interest

18 months of interest

Marcus by Goldman Sachs®

180 days of interest

180 days of interest

Synchrony Bank

90 days of interest

365 days of interest

2. Could I Earn More Interest by Reinvesting My Savings in a New CD?

If interest rates have gone up since you took out your certificate of deposit, it might be possible to earn more money by breaking your CD and reinvesting in a new account with a higher APY. Yet a higher APY doesn’t automatically mean that breaking your CD is the right move when an early withdrawal penalty is involved. You’ll need to do some calculations to figure out which financial move makes the most sense for your situation.

Here’s how to calculate whether you might earn more by making an early CD withdrawal and reinvesting your savings in a new CD with a higher APY:

  1. Calculate the amount of interest your CD earns each day or month. 
  2. Multiply the interest by the number of days (or months) of interest you would lose if you made an early withdrawal.
  3. Calculate the amount of interest you could potentially earn from the new CD, but only for the duration of the old CD’s term. 
  4. Compare the potential earnings from the new CD (for the duration of the old CD’s term) to the penalty.

If the penalty is less than the potential profits, it might make sense to break your CD early. But if your calculations result in a loss, it’s probably better to leave your cash in the existing CD until its maturity date. Then you can consider investing in a higher-rate CD or a high-yield savings account or money market account at a future date.

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Recommended Savings Accounts

UFB Direct Secure Savings Account

Open Account

at UFB

  • Our Rating 5/5 How our ratings work Read the review
  • APY5.25% More Info

    UFB Direct breaks balances into five tiers, but, currently, there is only one interest rate.

  • Minimum
    Deposit Required
    N/A
  • Intro Bonus N/A

The UFB Direct Secure Savings Account has one of the highest interest rates we’ve seen for a high-yield savings account at up to 5.25% APY. Plus, there are no monthly fees and no minimum balance to open.

Overview

With one of the strongest high-yield savings interest rates on the market, as well as no monthly fees or minimum opening deposit, UFB Direct’s Secure Savings Account is an extremely attractive package.

Pros

  • Strong interest rate
  • No maintenance fees or minimum monthly balances
  • Free complimentary ATM card
  • Mobile app and SMS banking

Cons

  • No signup bonus
  • No associated checking account

CIT Bank Savings Connect Account

Open Account

Member FDIC.

  • Our Rating 4.5/5 How our ratings work Read the review
  • APY4.65% More Info

    Annual Percentage Yield is accurate as of July 27, 2023. Interest rates for the Savings Connect account are variable and subject to change at any time without notice.

  • Minimum
    Deposit Required
    $100
  • Intro Bonus N/A

CIT Bank's Savings Connect account is one of our top picks for high-yield savings accounts. Featuring a competitive flat APY on all balances, it can go head-to-head with most of the top savings accounts available. What's more, you don't have to do anything special to earn this high interest rate; many similar accounts (including some offered by CIT) only offer their highest interest rates to customers who complete certain requirements.

Overview

With extremely competitive interest rates and a host of convenient features, the CIT Bank Savings Connect account can go head-to-head with nearly any other savings account in the U.S.

Pros

  • Competitive APY
  • No monthly service fee
  • Free electronic bank transfers to checking accounts (even if it isn't a CIT checking account)

Cons

  • No fee-free ATM network
  • Minimum opening deposit required

3. Do I Need to Access My Savings for Another Reason?

patient in hospital

Unsplash

You might need to access the cash in your CD early for an emergency or other unplanned need. Many financial experts recommend setting aside at least six months' worth of expenses to protect yourself in case of a job loss, illness or other financial catastrophes.

In general, it’s best to avoid keeping your full emergency fund in a CD. This type of account doesn’t offer you the same flexibility as other deposit accounts. But if you have stored all of your emergency money in a CD or if you’ve already exhausted your other savings, you might find yourself in a position where an early CD withdrawal is necessary.

It can be upsetting to face an early withdrawal penalty and lose a portion of the interest you worked hard to earn, but having those savings could help you out of a crisis, which is sometimes the most important thing. Once your financial situation improves, you can work to rebuild your emergency fund for the future.

Bottom Line

When you open a CD from an FDIC insured bank and remain within federal deposit limits, your savings is protected from loss. Making an early withdrawal is one of the only ways you might lose money with this type of low-risk investment

Nonetheless, there are a few situations where an early CD withdrawal could make sense. Just be sure to take your time, crunch the numbers and examine your situation from all angles before you make a decision that you can’t reverse.

ML

Michelle Lambright Black

Michelle Black is founder of CreditWriter.com and HerCreditMatters.com. Michelle is a leading credit card journalist with over a decade and a half of experience in the financial industry. She’s an expert on credit reporting, credit scoring, identity theft, budgeting, small business, and debt eradication. Michelle is also a certified credit expert witness and personal finance writer.