When Should I Consider A No-Penalty CD?

  • A no-penalty CD is a certificate of deposit that lets you withdraw your money without penalty, typically starting seven days after the day the CD was funded.
  • Rising interest rates, saving for something specific, and CD laddering are some reasons to consider a no-penalty CD.

You have choices when it comes to where to put your savings. Many people think of savings accounts or certificates of deposit (CDs). A no-penalty CD is a product that combines some of the best features of both.

You can typically withdraw your money (penalty-free!) beginning seven days after funding a no-penalty CD. And, a no-penalty CD offers interest rates that may be higher than those on traditional savings accounts, with an added benefit: unlike a savings account, your CD’s interest rate is fixed so you don’t have the risk of it decreasing during the term.

But when should you consider a no-penalty CD? Here are a few considerations.

No-penalty CDs can be useful in several situations

When interest rates are rising

CDs tend to get more attention when the Federal Reserve raises interest rates because when the Fed raises rates, interest rates on CDs and other products may rise as well.

No-penalty CDs provide the flexibility to withdraw your money and to put those funds into a different, higher-yielding CD.

When you’re creating a CD ladder

When the term on a traditional CD ends, you can either withdraw your funds or roll them over into another CD. If you’re thinking about creating a CD ladder, it could be worth adding a no-penalty CD to the mix, particularly if you aren’t sure when you might need to withdraw the money.

When you’re building an emergency fund

Emergency funds should be easily accessible when the unexpected happens. Savings accounts aren’t the only savings vehicles that can give you that accessibility. With a no-penalty CD, you could enjoy interest rates that are typically higher than in a traditional savings account and still get the flexibility to withdraw funds when you need them.

Shopping for a no-penalty CD

If you’re interested in a no-penalty CD, start by doing some research. Compare interest rates, check the minimum deposit required and see if there are any fees or conditions.

Also, pay attention to how the interest is compounded. Typically, banks compound daily, monthly, quarterly or annually. The interest in No-Penalty CD from Marcus by Goldman Sachs is compounded daily.

Growing your savings can be hard enough. With a no-penalty CD, you get some of the best features of a savings account – accessibility – while still enjoying the benefit of earning a CD rate.

No-Penalty CD: The confidence of a fixed rate and the freedom to withdraw your entire balance beginning 7 days after funding

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.