While putting money into a CD is a great way to score a guaranteed interest rate — and usually, a higher interest rate than a savings account — there’s a risk involved. If you withdraw money from your CD before its maturity date, your bank could hit you with a costly penalty.

Early withdrawal penalties for CDs are at banks’ discretion. There’s no universal penalty for early withdrawals. Rather, each bank can decide what penalty to impose. They just have to include that information in their CD disclosures so customers know what to expect. But there may be something you can do to avoid an early CD withdrawal penalty.

Making savvy CD choices could spare you from losing money

Setting up a CD ladder could reduce your chances of facing an early withdrawal penalty. With a CD ladder, instead of opening one CD with all of your money, you open several with staggered maturity dates.

Let’s say you want to put $3,000 into CDs to capitalize on today’s great rates. You could open one 12-month CD. Or, you could split that sum into four and open a 3-month CD, 6-month CD, 9-month CD, and 12-month CD with $750 each. This way, some of your money becomes available every three months, making it less likely that you’ll have to cash out a CD early.

But even with a CD ladder, you might run into an issue of not having enough money free up when you need it. One thing you may want to do on top of a CD ladder is open a CD at a bank you have a relationship with.

The reason? Even though banks are allowed to charge an early withdrawal penalty for taking money out of a CD before it matures, they don’t have to. And if you’re a long-term customer, you may be able to get out of a CD penalty by making a phone call and asking for some leeway.

Say you open a CD but run into a surprise home repair and end up needing the cash. If you call your bank and explain the situation, it may be willing to waive the penalty if you’ve held an account there for many years. You might have a similar experience if you lose your job a couple of months after opening your CD and explain why you need the money.

It’s the same situation with credit card companies. Sometimes, they’ll waive a late fee due to extenuating circumstances if you call and ask. But if you have a more established relationship with your bank or credit card issuer, it’s more likely to work with you.

Be careful when opening a CD

Laddering your CDs and choosing a bank you’ve used for years could help you avoid an early withdrawal penalty. Also, before you commit to a CD, consider your financial situation and make sure you’re really good to tie up your money for a given period.

You should ask yourself:

• Am I all set as far as my emergency fund goes?
• Do I have reason to believe that my car or home will need a repair soon?
• Have I been putting off a health issue that I might need to address, like dental work?

In a nutshell, you want to feel comfortable putting money into a CD with the knowledge that you won’t be able to use it for a while. Even if you run through this exercise, emergencies can happen. But this way, you’re at least going in with peace of mind.

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 2026

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.