Answers about CDs and Certificates of Deposit

I cashed my Time Certificate of Deposit (CD) before it matured, and the bank charged me an early withdrawal penalty. Can it do this?

Yes. Time Certificates of Deposits (CD) are not liquid: When you buy one, you enter into a contract involving a fixed amount of money (principal) for a predetermined period of time (the term) and an agreed-upon interest rate and yield.

Banks are permitted to assess an early withdrawal penalty whenever funds from a time deposit are withdrawn prior to the date of maturity. This penalty should be explained in the Account Agreement you received when you opened your account.