Split CDs into Smaller Amounts to Limit Early Withdrawal Fees

Tip Hero serves up fresh money-saving tips daily,
with over 2,000 tips shared to date.

GET FREE UPDATES:

Tips by Category:

Personal Finance

Home > Personal Finance > Topics: Bank CDs

-----------------------------------------

Split CDs into Smaller Amounts to Limit Early Withdrawal Fees

Submitted by: Ray @ Tip Hero 10/15/2009 3:15 AM

I've been doing this for over a year but didn't think of it as a money-saving tip until I saw it on Lifehacker the other day.

Most banks charge penalties for early withdrawal of CD's. For example, ING Direct, an online bank with which I have several CDs, charges a penalty of six month's interest for early withdrawal of a one year CD.

A little over a year ago, I had some money I wanted to put in a CD to lock in a higher interest rate before the Fed lowered rates. I wasn't sure if I would need some of the money during the year. Instead of putting all the money in a single CD, I decided to spread it out among five CDs. This way, if I needed to withdraw some of the money during the year, I would only have to pay the early withdrawal fee on a portion of my savings rather than the entire lump sum.

With ING Direct (and most other banks too) there is no extra fee for having multiple CDs, so this is a cost-free strategy for reducing your exposure to early-withdrawal fees.

Related Searches

high yield cds compare bank cd rates

---
sponsored: Find Money Budgeting Tips.

---
Tip Hero serves up new money-saving tips daily.
Get free updates via Email , RSS or Twitter.

More Money-Saving Tips:

Two Simple Investing Tips from Warren Buffett

Sponsored Searches:

Higher Interest Rate Cd

Compare Cd Rates

Comments:

.................................

I was under the impression that you were only charged the fee on the amount you withdraw. I didn't think you had to close the whole account.

Posted by anonymous on October 15, 2009 2:58 PM

.................................

The above comment is correct in the fact that you are only penalized on the amount withdrawn. You do not have to withdraw/close the account out completely. I work for a bank and this has been the standard practice for the last 30 years. The remaining balance continues to draw interest for the duration of the original account term at that particular interest rate.

Posted by Sherrill on October 15, 2009 5:57 PM

.................................

Splitting the CDs up into smaller amounts is a great idea! I have a "CD ladder" with ING Direct where I have multiple CDs that are locked in for different amounts of time.

So far I haven't had to take out any of the money but it's nice to know that it's liquid enough to do so if I wish.

Unfortunately CDs are at a 1.75% interest rate at the moment with ING Direct so I doubt the penalty would hurt that bad if I removed the money before its maturity date anyway.

Posted by Kim on October 24, 2009 9:16 PM

.................................

-----------------------------------------

Share Your Comments:

Comments may need to be approved before they are displayed.

Comments:

Name (leave blank if you want to be anonymous):

Email Address (your email address will not be displayed):

Website URL (not required; please do not include "http://"):