CDs are low-risk investments that offer fixed interest rates for a specified period, typically ranging from a few months to several years.
Two types of CDs that investors often consider are the traditional 6-month CD and the no-penalty CD. While both options offer stable returns, they have different terms and benefits that may appeal to different investors.
In this comparison, we will take a closer look at the CD rates for both options and help investors determine which one is the best fit for their investment goals and needs.
No Penalty vs. 6-Month CD Rates: Comparison
A no penalty CD allows you to withdraw your funds at any time during the term without incurring a penalty. This gives you the flexibility to access your funds if you need them without having to worry about losing any of your interest earnings.
Unfortunately, few banks are offering no-penalty CDs. You can find it with Synchrony, CIT, Ally, Marcus and Citi. However, the interests rates are quite high and the difference in rates compared to 6-month CD is minor, in most cases.
On the other hand, a 6-month CD has a fixed term of 6 months, meaning that you must keep your funds in the account for the entire term to earn the full interest rate. However, 6-month CDs often offer higher interest rates than no penalty CDs and may be a good option for those who are willing to lock their funds away for a short period of time to earn a higher return.
Financial Institution | No Penalty CD | 6-Month APY | Min Deposit |
|---|---|---|---|
0.25% (11-month)) | 4.40% | $0 | |
3.50% (11-month) | 3.00% | $1,000 | |
4.50% (11-month) | 4.90% | $0 | |
4.50% (13-month) | 4.75% | $500 | |
0.05% (12-month) | 3.75% | $500 | |
N/A | 4.25% | $0 | |
N/A | 4.25% | $2,500 | |
N/A | 3.00% | $1,000 | |
N/A | 4.50% | $2,500 | |
N/A | 4.70% | $1,000 | |
N/A | 4.80% | $1,000 | |
N/A | 3.00% | $1,000 | |
N/A | 4.00% | $50 | |
N/A | 5.25% | $1,000
| |
N/A | 4.00%
| $1,000
|
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What Is The Early Withdrawal Fees For a 6-Month CD?
When you withdraw funds from a CD before its maturity date, the financial institution may impose an early withdrawal fee, which is a penalty for accessing your funds before the agreed-upon term.
The amount of the early withdrawal fee can vary significantly between different banks and credit unions. For instance, if you have a 6-month CD, Ally Bank charges the lowest penalty of 60 days of interest, while CIT, Discover, and Chase Bank impose a higher penalty of 180 days or 6 months of interest.
It's worth noting that the early withdrawal penalty is typically capped at the amount of interest earned on the CD. For example, if the penalty is calculated as 150 days of interest but you withdraw your funds after 70 days, the penalty will be limited to 70 days of interest. While you'll still earn some interest, your overall earnings may be lower due to the early withdrawal penalty.
Also, unlike traditional CDs, brokered CDs don't incur a penalty – you just need to pay a trading fee, based on the deposited amount.
Financial Institution | 6-Month CD Early Withdrawal Penalty |
|---|---|
90 days of interest
| |
6 months of interest | |
60 days of interest
| |
90 days interest
| |
90 days of interest | |
3 months interest
| |
6 months interest
| |
365 days / 30% of dividends (The lower)
| |
90 days of interest | |
Fees, based on the amount | |
Fees, based on the amount | |
180 days of interest
| |
90 days of dividends
| |
25% of total interest earned |
Should I Consider a 6-Month or No Penalty CD?
Deciding between a 6-month CD and a no penalty CD depends on your individual financial goals and circumstances.
A 6-month CD may be a good option if you're comfortable with locking your funds away for a set period of time and want to earn a higher interest rate than what's offered by a no penalty CD. With a fixed interest rate for the term, you'll know exactly how much interest you'll earn by the end of the CD's term, which can be beneficial for CD laddering and planning purposes.
On the other hand, a no penalty CD can be a better choice if you prioritize flexibility and accessibility to your funds. With a no penalty CD, you can withdraw your funds at any time without facing a penalty fee. This can be especially useful if you anticipate needing to access your funds before the end of the CD term.
Ultimately, the choice between a 6-month CD and a no penalty CD depends on your financial needs and goals.
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