Need cash early from a CD? Consider a partial withdrawal

By Sabrina Karl

If you find you need early access to funds you have tied up in a CD, there is little way around paying a penalty for that option. You may, however, be able to minimize the hit by taking only what you need.

 

When you open any new CD, the bank or credit union provides you with a very detailed agreement. The obvious parameters are the interest rate you’ll be paid and the duration of the CD’s term. In addition, the exact calculation for any early withdrawal penalty will be outlined. Most typically, banks charge a certain number of months’ earned interest if you cash in early.

 

Not all CDs, however, are all or nothing. If your agreement allows for it, you may be able to withdraw only a portion of your CD principal, if what you need is less than your full CD balance. This can save you money as most early withdrawal penalties are applied only to the amount withdrawn.

 

Granted, whatever your agreement says is what you’re bound to. So if the ability to make a partial withdrawal is a feature you find important, the time to look for that is before you open a CD, and perhaps shifting your CD decision to an institution offering the terms you want.

 

There’s another strategy, though, that gives you partial withdrawal options even if the institution you’re choosing doesn’t offer them. Simply open multiple CDs that together total your full desired deposit. For instance, instead of opening one $10,000 CD, you could open four $2,500 CDs. Then if you find you need early access to the funds, you can cash in only the certificates you need.

 

Of course, the best move is usually to avoid breaking any CDs early. But since life is unpredictable, it’s good to have options.