About the CD Early Withdrawal Penalty Calculator
This CD early withdrawal penalty calculator estimates what it costs to cash out a certificate of deposit before it matures. Enter the deposit, the CD’s APY, its term, how many months you have held it and the bank’s penalty (usually stated as a number of months of interest), and it shows the interest you have earned, the penalty, what you would walk away with, and the return you actually earned.
It is most useful when rates have risen and you are wondering whether to break an old CD and move the money into a higher-paying one. Enter the new rate and the calculator compares reinvesting for the rest of the original term with simply keeping the CD, and tells you the break-even rate a new account would need to pay to come out ahead.
Penalties vary by bank and by term: three months of interest on short CDs and six to twelve months (sometimes more) on terms of two years or longer are common. Most banks compute the penalty as simple interest on the amount withdrawn at the CD rate, which is what this calculator assumes. If the penalty is larger than the interest earned so far, the difference comes out of your principal. Check your account disclosure for the exact rule.
With the default inputs, the early withdrawal penalty is $250.00. Change any value above to recalculate instantly.
How to use the cd early withdrawal penalty calculator
- 1Enter the CD amount, its APY and its full term in months.
- 2Enter how many months you have held it.
- 3Find the penalty in your account disclosure (for example, 6 months of interest) and enter it.
- 4Optionally enter the APY you could earn elsewhere.
- 5Compare the penalty, net interest and break-even rate before you call the bank.
Formula and method
The penalty is modelled as simple interest on the withdrawn principal at the CD’s rate for the stated number of months, the most common method in US bank disclosures. Interest earned so far assumes the CD compounds at its APY for the months you have held it. Net interest is earned interest minus the penalty; the amount you receive is principal plus net interest.
To decide whether to move the money, the calculator grows the cash-out amount at the new APY for the remaining months of the original term and compares it with the value of the CD at maturity. The break-even APY is the rate that makes both equal. Taxes are ignored; note that in the US an early withdrawal penalty is generally deductible from income.
- P
- CD principal withdrawn
- m
- Penalty length in months of interest
- h
- Months held
- T
- Original CD term in months
- Keep
- Value of the CD at maturity, P × (1 + APY)^(T/12)
- Cash
- Amount received when breaking the CD
Worked examples
$10,000 2-year CD at 5% broken after 8 months
After 8 months the CD has earned $330.62. Six months of interest at 5% is a $250 penalty, leaving $80.62 — an annualized return of only about 1.21%. Keeping the CD would give $11,025 at maturity, so a new account would need about 6.95% APY for the remaining 16 months to beat it.
$25,000 5-year CD, reinvest at 5.5% after 30 months
Halfway through a 5-year CD at 4.5%, the interest earned is $2,908.13 and a 12-month penalty costs $1,125. Reinvesting the $26,783.13 at 5.5% for 30 months gives $30,619.10, about $535 less than keeping the CD ($31,154.55). The break-even rate is roughly 6.23%.
Penalty larger than interest earned
Two months into a 1-year CD only $32.79 of interest has accrued, but the 3-month penalty is $50, so $17.21 comes out of principal and you receive $4,982.79.
Frequently asked questions
How is a CD early withdrawal penalty calculated?+
Most banks charge a set number of months (or days) of simple interest on the amount withdrawn, at the CD’s rate. For example, 6 months of interest on $10,000 at 5% is $10,000 × 5% × 6/12 = $250. Your account disclosure states the exact formula.
Can a CD penalty take my principal?+
Yes. If you withdraw early, before enough interest has accrued to cover the penalty, many banks deduct the shortfall from your principal, so you can get back less than you deposited.
Is it worth breaking a CD for a higher rate?+
Only if the new rate is high enough to earn back the penalty over the remaining term. Compare the value of keeping the CD with the cash-out amount reinvested at the new rate; the break-even APY shown above is the minimum the new account must pay.
Is the CD early withdrawal penalty tax deductible?+
In the US, the penalty is generally deductible as an adjustment to income, reported by the bank in box 2 of Form 1099-INT. You still report the full interest earned as income.
Are there CDs without early withdrawal penalties?+
Yes. No-penalty (liquid) CDs let you withdraw after a short initial period, usually about a week, without a fee, but they typically pay a lower rate than standard CDs of the same term.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.