No-Penalty CDs: Overview and How They Work

By Lyle Daly – Updated Dec 16, 2025 at 2:59 PM EST | Fact-checked by Frank Bass

Key Points

No-penalty CDs allow early withdrawal without fees, offering flexibility in unforeseen situations.
These CDs feature lower interest rates than traditional CDs, trading higher yields for withdrawal freedom.
No-penalty CDs are best used when future interest rates are uncertain or if funds may be needed soon.

Certificates of deposit (CDs) normally have a penalty if you withdraw money before the maturity date. A no-penalty CD doesn't charge an early withdrawal fee, giving you more flexibility if you need your money ahead of schedule. You get the perks of CDs, without the biggest drawback.

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Bank teller with customer — Image source: Getty Images.

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About the Author

Lyle Daly is a contributing Motley Fool stock market analyst covering information technology and cryptocurrency. Lyle has been a contributor at the financial services company since 2018. His work has been featured on USA Today, Yahoo Finance, MSN, Fox Business, and Nasdaq. Before joining The Motley Fool, he wrote for financial brands including Intuit.

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