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I cashed my certificate of deposit (CD) before it matured, and the bank charged me an early withdrawal penalty. Can it do this?

Yes. While there are some exceptions, CDs are not intended to be liquid (that is, able to be converted into cash easily at any time). When you buy a CD you enter into a contract involving a fixed amount of money (principal) for a predetermined period of time (the term) and an agreed-upon interest rate and yield.

Banks are generally required by law to assess an early withdrawal penalty whenever funds from a CD are withdrawn prior to the date of maturity. Read your account agreement for information about your bank's policies and fees.

Last Reviewed: April 2021

Please note: The terms "bank" and "banks" used in these answers generally refer to national banks, federal savings associations, and federal branches or agencies of foreign banking organizations that are regulated by the Office of the Comptroller of the Currency (OCC). Find out if the OCC regulates your bank. Information provided on should not be construed as legal advice or a legal opinion of the OCC.

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