No-Penalty CDs Combine Good Rates and Flexibility. These Are Some of the Best Options Right Now

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No-penalty CDs offer a secure and flexible way to earn some interest on your savings. And unlike traditional CDs, you can avoid the steep penalties that can come from withdrawing your money before maturity.

Today, many no-penalty CDs offer interest rates comparable to high-yield savings accounts and money market accounts. However, they may come with minimum deposits you’ll need to meet before opening.

Before choosing any new account, it can pay to compare multiple banks to find the one with the highest yield and other account details that work for your goals. After all, banking products are incredibly competitive, and that’s true whether you are looking for CDs, savings accounts, or money market accounts. 

As you compare rates for no-penalty certificates of deposit, look beyond traditional, brick-and-mortar financial institutions and toward online banks. Almost all the time, you’ll find that online banks and credit unions offer more competitive interest rates on CDs, including no-penalty CDs. Many online banks also make it easy to open a CD online, which can be more convenient than having to visit a bank in person.

Here are a few of the best no-penalty CD rates today from online banks, and what to know before opening a no-penalty certificate of deposit account:

Best No-Penalty CD Rates for January 2023

BankCD TermAPYMinimum Deposit
Ally Bank11 months3.50%None
CIT Bank11 months3.90%$1,000
Marcus by Goldman Sachs13 months3.30%$500
Synchrony Bank11 months3.30%None

Note: The above APYs are accurate as of the publish date. The NextAdvisor editorial team updates this information regularly, though it is possible rates have changed since they were last updated.

Ally Bank

Ally’s no-penalty CD has an 11-month term and requires no minimum deposit to open. You can withdraw your deposit in full at any time without penalty, after the first 6 days from funding the account.

CIT Bank 

CIT bank also has an 11-month no-penalty CD. CIT requires a $1,000 minimum deposit, but you can withdraw your balance without penalty starting 7 days after the funds are received.

Marcus by Goldman Sachs

Marcus offers a few no-penalty CD terms: 7 months, 11 months, and 13 months. You’ll get the best rate when you choose the 13 month term, though. There’s no early withdrawal penalty to withdraw your balance in full, but you will need to wait at least 7 days after funding the account.

Synchrony Bank

There’s an 11-month term on Synchrony’s no-penalty CD option as well. There’s no minimum deposit requirement and no penalty for withdrawing early, as long as you wait 6 days after funding your account.

How We Chose These Banks

To determine this list of best no penalty CD rates, we used our standing list of best CD rates, as well as analysis of other commonly reviewed and searched-for no penalty CDs. This list encompasses the banks that both offer no-penalty CDs and meet our criteria for best CDs generally, including minimum deposit requirements, no fees, and transparent terms.

What is a No Penalty CD?

A no-penalty CD is a certificate of deposit that’s more flexible than a traditional CD. You may also see these CDs referred to as “liquid” CDs. That’s because no-penalty CDs have competitive fixed interest rates, without the penalties normal CDs charge if you need to withdraw your money early.

In many ways, choosing a no-penalty CD is a lot like picking any new CD. Start by looking for a no-penalty CD with the best rate and a timeline that makes sense for your goals. From there, you’ll deposit a set amount of money with plans to keep it there until your certificate of deposit reaches maturity.

Like regular CDs, you generally cannot add more money to a no-penalty after the initial purchase. Only the amount you deposit upfront earns interest for the duration of the CD term.

If you do need to withdraw early, most banks will let you cash out your CD early with a single withdrawal, which essentially closes the CD. However, waiting periods may apply, so make sure you read over the fine print before you agree to tying your money up for any length of time.

Are No-Penalty CDs Better than Regular CDs?

No-penalty CDs have some features that can make them more attractive than regular certificates of deposit, but there are some downsides to keep in mind, too.

Pros of no-penalty CDs:

  • More liquidity than regular CDs: No-penalty CDs do not charge penalties to access your deposit early. You can typically get your money back through a single withdrawal, though waiting periods that might apply.
  • Earn more than a high-yield savings account: No-penalty CDs earn a fixed rate of interest for a fixed period of time. You may be able to lock in a higher yield than you would with a high-yield savings account, especially if interest rates begin to drop. 
  • FDIC insurance: Like online savings accounts, CDs come with FDIC insurance worth up to $250,000 per depositor, per account.

Cons of no-penalty CDs: 

  • Lower yields than regular CDs: While no-penalty CDs offer more flexibility than traditional certificates of deposit, the tradeoff is often-lower interest rates
  • Minimum balance requirements: Some no-penalty CDs have high minimum deposit requirements that make it difficult to earn the highest advertised rate.
  • Waiting periods: Many banks only allow you to withdraw your deposit penalty-free after meeting certain time limits. However, these waiting periods are usually only about a week after you fund your account.

Best Term for a No-Penalty CD

No-penalty CDs tend to have terms shorter than traditional CDs — many range from six to 14 months. The longest no-penalty CD term on our list right now is 13 months. 

But in a rising rate environment like today’s, a shorter CD term — around one year —  can be a good option for locking in a good rate while ensuring you can take advantage of potentially higher rates in the near future. And the plus of a no-penalty CD is that you can withdraw your balance at any time; so if you choose a term that’s not right for you and need your money before maturity, you’ll still have the option.

The best CD term for you is the one that best suits your individual financial goals. The right combination of competitive interest rate and term length can help you keep your money safe and earn a bit of interest along the way.

Here are a few more resources to help you learn about saving with CDs right now: