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. CDs 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Banks are generally required by law to assess an early withdrawal penalty whenever funds from a time deposit are withdrawn prior to the date of maturity.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.

July 2017