The best no-penalty CD rates right now are offered by CIT Bank and Ally Bank

TL;DR

On November 8th, CIT Bank raised the APY rate on its no-penalty 11-month CD product from 1.45% to 1.55%. This challenges the previous supremacy of Ally Bank’s no-penalty 11-month CD product which yields 1.0%, 1.25%, or 1.5%, depending on the deposit amount.

Commonalities

In many ways these two leading no-penalty certificates of deposit have the best features of all deposit account types rolled into one product in a way that’s relatively free of tradeoffs:

  1. Like a typical CD, they enable you to earn a relatively high interest rate that is guaranteed to not be reduced for the duration of the deposit term, which is 11 months in the case of these products. So there is no risk of a bait-and-switch teaser rate that gets lowered after you open the account, as sometimes occurs with savings and money market accounts.
  2. Unlike a typical CD, they have no early withdrawal penalty (e.g. 6 months worth of interest, even if you’re less than 6 months into the deposit period of the CD). So if you unexpectedly need to access your funds or just become aware of a better investment option you want to pursue, you can withdraw the entire amount of your deposit without incurring a penalty.

The no-penalty CDs covered in this post are not entirely free of constraints, however:

  1. No partial withdrawals are permitted:  If you do choose to exercise the penalty-free early withdrawal option, you have to withdraw your entire deposit amount. It’s generally possible to open more than one CD of the same type at an institution, so you can probably mitigate this constraint to some extent by breaking your total deposit amount into separate tranches, each of which could be withdrawn without touching the other tranches.
  2. These are not add-on CDs:  You are not allowed to add additional funds to a no-penalty CD during its deposit term. However, it should be possible to open additional no-penalty CDs so long as you meet the minimum deposit amount, which is detailed below.

CIT Bank logo

CIT Bank No-Penalty 11-Month CD

CIT’s product is pretty simple.  It has a superior 1.55% APY regardless of the deposit amount, a minimum deposit of $1,000, and you can withdraw your money in full after 7 days from the time of deposit. While the CIT no-penalty CD has no maximum deposit amount, we recommend limiting your aggregate CIT deposits to the federally insured maximum, currently $250,000.

You can read the fine print and apply for CIT Bank’s no-penalty CD here.

Ally Bank No-Penalty 11-Month CD

Ally Bank logo

Ally’s product is tiered, with the rate depending on the deposit amount.  It earns:

  • 1.50% APY for deposits of $25,000 or more
  • 1.25% APY for deposits between $5,000 and $24,999.99
  • 1.00% APY for deposits of less than $5,000

With Ally’s product you can withdraw your money in full after 6 days from the time of deposit.

You can read the fine print and apply for Ally Bank’s no-penalty CD here.

Other No-Penalty CDs

No-Penalty CDs are fairly rare and the others I found were not at all compelling. For example, Swineford National Bank has a 9-month no-penalty CD with an APY of just 0.15%. The Columbia National Bank has a similar 9-month no-penalty CD with an APY of 0.05%, but with something called “Relationship Banking” the APY is 0.30% — still a pass, in my opinion. AgFed Credit Union previously had a 30-month no-penalty CD with a 1.85% APY, but, sadly, that ended in September.

 

Finally, to compare these leading no-penalty CD products to competing CD products and other types of deposit accounts, you can use our bank accounts tool.

 

 

 

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