How CD penalties are usually stated
Most CD disclosures state the early withdrawal penalty as a number of months of interest, such as “3 months of interest”, or a number of days of interest, such as “90 days of interest”. The rules differ between accounts, so read your own disclosure; the calculator uses only what you enter.
A months-based penalty is A × r ÷ 12 × m, and a days-based penalty is A × r × d ÷ 365, where A is the amount withdrawn and r is the interest rate. At an example 4.00%, a 90-day penalty on $10,000 is $98.63.
Worked example
Take $10,000 in a 12-month CD at an example rate of 4.00% APR, compounded monthly.
- Withdraw at 6 months with a 3-month penalty: interest earned $201.67, penalty $10,000 × 4.00% ÷ 12 × 3 = $100.00, net interest $101.67, and you receive $10,101.67.
- Withdraw at 2 months with a 6-month penalty: interest earned $66.78, penalty $200.00, and you receive $9,866.78.
When a penalty can cut into your deposit
Early in the term you may not have earned enough interest to cover the penalty. In the second example the penalty is larger than the interest, so the deposit is cut by $133.22 at some institutions, which take the rest of the penalty from principal. The calculator shows this as a red line. Other accounts have different rules, so check your disclosure.
Partial withdrawals
Some CDs allow partial withdrawals and some don't. If yours does, choose “Part of it” and enter the amount: the calculator applies the penalty to the amount withdrawn. Withdrawing $4,000 with a 3-month penalty at an example 4.00% costs $40.00. If you are spreading money across terms to keep some of it available, see the CD ladder calculator; for interest by month, see the CD interest calculator.