How CD early-withdrawal penalties work
When you take money out of a certificate of deposit before its maturity date, the bank charges a penalty. It is almost always quoted as a number of months of interest — for example "90 days of interest" or "six months of interest" — calculated as simple interest on the amount withdrawn at the CD's stated rate.
Penalty = deposit x rate x (penalty months / 12)Can an early withdrawal lose money?
Yes. If you break the CD before you have earned more interest than the penalty, the bank takes the difference out of your principal — so you get back less than you deposited. That usually happens when you withdraw in the first few months of a CD with a long penalty. This calculator flags exactly when that occurs.
Typical penalty sizes
- Short terms (under 1 year): often 3 months of interest.
- Mid terms (1–3 years): commonly 6 months of interest.
- Long terms (4–5 years): frequently 12 months of interest.
- Always check your specific CD's disclosure — penalties vary by bank and term, and no-penalty CDs exist.