Ramses Delgado, Banking Moderator
@ramses_delgado1
If you close a CD before its maturity date, you'll likely face some consequences, primarily involving early withdrawal penalties and missed potential earnings. Here's a breakdown of what can happen:
- Early withdrawal penalty: Banks charge this fee to compensate for the lost interest they would have earned had you kept the money in the CD until maturity. The penalty is typically calculated as a portion of the interest earned on the CD, often based on a specific number of days' interest (e.g., 90 days, 180 days). In rare cases, some banks may even charge a portion of the principal depending on the terms of the CD and how early you withdraw.
- Missed potential earnings: By withdrawing early, you miss out on the remaining interest you would have earned had you kept the money in the CD until maturity. This can be a significant amount, especially for longer-term CDs with high interest rates.
- Exceptions: In some rare cases, you may be able to close a CD without penalty under specific circumstances, such as: Death of the CD owner, disability of the CD owner, moving accounts from a closed bank, using the funds for certain emergencies as defined by the bank.
Overall, closing a CD before maturity should be a last resort. It's important to carefully weigh the consequences and explore alternative options before making a decision.
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