The Facts About CD Penalties & Minimum Deposits

Understanding CDs

September 2012

Withdrawing money early from a CD usually means you'll pay a penalty that can significantly reduce the overall return. However, the Ally No Penalty CD allows you to withdraw money without a penalty anytime following the six days after the bank receives your opening deposit. It's a great way to get maximum flexibility and still earn a competitive interest rate.

Most CDs also require a minimum deposit, which is frequently $1,000 but can reach $100,000 for some "jumbo" CDs. At Ally, you can open and fund your CD with any amount. CDs usually can provide slightly greater interest earnings than money market accounts and, depending on why you're putting money away, could be a better choice. Simply put, the deposit term on CDs helps impose savings discipline and removes the temptation to tap into the funds for something other than your initial goal.

That said, CDs need not impose too much of a financial straight jacket. By staggering the terms of your CDs, a technique known as "laddering", you can provide yourself with flexibility should you need to unexpectedly make a withdrawal.

Cashing in only the CDs necessary, and choosing the ones that are closest to maturity, may allow you to limit any penalties.

Compare Ally's line of CD offerings with the Ally Money Market Account and see which one works with your financial needs.

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