Most of us are familiar with how a traditional CD works. You make an opening deposit, select a term, and the money sits and accrues interest at a set rate until the term expires. From there, you can either cash it out for the new balance or roll it over to continue accruing interest.
As a consumer, you really have just two important considerations when choosing a CD: Is the interest rate attractive and how long are you willing to go without access to the funds? The reason is because CDs typically have substantial fees for withdrawing the principal balance before it reaches the end of its term, also known as maturity.
But what if there was another option, one that combined a great interest rate and eliminated the early withdrawal fee?
How a No-Penalty CD Works
Some financial institutions are warming to the idea of a no-penalty CD. These often come with special terms and restrictions but allow customers to make a certain number of withdrawals - either partial or in full - prior to the maturity date without suffering penalties. In rising rate environments, like the one we’re currently experiencing, these can be a particularly effective savings tool by allowing customers to access their typically locked money at any time.
The liquidity offered by no-penalty CDs as opposed to traditional CDs are a great advantage since they allow you penalty-free access, whether it’s for an emergency or even more attractive rates become available. OMB’s new 2.35% APY* no-penalty 11-month CD allows you to make a one-time withdrawal of the entire balance without a fee after the initial six-day funding period, giving customers the best of both worlds: High yields and liquidity.
CDs offer many advantages including fixed rates, higher returns than many savings accounts, security, and typically no monthly maintenance fees. With a no-penalty CD, they can be that much better. Savvy savers can also utilize additional wealth-building strategies with CDs such as laddering. You can check out OMB’s current CD rates and specials here.
OMB and its affiliates do not provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decision.
*APY = Annual Percentage Yield. Requirements include a minimum opening deposit of $1,000 and no maximum amount per person. APY accurate as of 08.02.2022. Rate subject to change without notice; see Truth-in-Savings for complete account disclosure. Early withdrawals are not permitted within the first 6 days following account funding; after this period, balance must be withdrawn in full. No penalty CD will renew as a penalty CD with a rate based on the 12-month board rate in effect at time of maturity. This offer is good for a limited time only and may be withdrawn at any time at the Bank’s discretion. Fees could reduce earnings. Consumer only.
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