What Is a No Penalty CD? How It Works and When It Makes Sense
A no penalty CD locks in a rate but lets you withdraw early without paying a penalty, usually after the first week. Here is how it works, the catches, an example from Marcus and how it compares with savings and regular CDs.
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A no penalty CD is a certificate of deposit with a fixed rate that lets you take your money out before the term ends without paying an early withdrawal penalty, usually starting seven days after you fund it. The trade offs: the rate is often a little lower than a regular CD of similar length, and you typically have to withdraw the whole balance at once. Marcus, for example, offers 7, 11 and 13 month no penalty CDs.
A regular CD pays a fixed rate but charges a penalty if you take your money out early. A no penalty CD, sometimes called a liquid CD, removes that penalty. It sits between a savings account and a regular CD.
How does a no penalty CD work?
- You deposit a lump sum and lock in a fixed APY for the term.
- You wait out the first week. Federal rules treat a CD as a time deposit, and banks generally do not allow penalty free withdrawals in the first six days. Marcus allows withdrawals starting seven days after funding.
- After that, you can withdraw everything at any time without a penalty, keeping the interest earned so far.
- If you leave it alone, it earns the fixed rate until maturity, like any CD.
Example: Marcus No Penalty CDs
| Term | APY | Minimum |
|---|---|---|
| 7 months | 3.75% | $500 |
| 11 months | 4.00% | $500 |
| 13 months | 3.80% | $500 |
APYs as of Oct 8, 2026, from marcus.com. Marcus requires you to withdraw the full balance, starting seven days after the funding date. Rates can change before you open.
For comparison, Marcus pays 4.40% APY on its regular 12 month CD (as of Oct 28, 2026), and Barclays pays 4.50% APY on a 12 month CD (as of Oct 7, 2026). The no penalty version trades some rate for flexibility. Read more in is Marcus legit?
No penalty CD vs. high yield savings vs. regular CD
| No penalty CD | High yield savings | Regular CD | |
|---|---|---|---|
| Rate | Fixed for the term | Variable | Fixed for the term |
| Early withdrawal | No penalty after the first week; usually full balance only | Any time | Penalty, often 90 to 365 days of interest |
| Add money later | Usually no | Yes | Usually no |
| Typical rate | Often a bit below regular CDs | Varies widely | Usually the highest of the three |
| Insurance | FDIC or NCUA | FDIC or NCUA | FDIC or NCUA |
When does a no penalty CD make sense?
- You think rates may fall, but want an exit if a better option comes along.
- You may need the money, but probably not before the term ends.
- The no penalty rate beats your savings rate. If a no rules savings account pays more, the CD adds little. At our latest check, Pibank Savings pays 4.40% APY with no monthly rules.
The catches
- All or nothing. Many no penalty CDs, including Marcus, require you to withdraw the full balance, which closes the CD.
- A lower rate. You often give up some yield vs. a regular CD of similar length.
- No added deposits. Like most CDs, you fund it once.
- Automatic renewal. Check what happens at maturity and set a reminder.
Are no penalty CDs safe?
Yes, at an FDIC insured bank or NCUA insured credit union, up to $250,000 per depositor, per ownership category. Marcus deposits are held at Goldman Sachs Bank USA (FDIC 33124).
Alternatives
- A short regular CD with a light penalty. Barclays charges 90 days of interest on terms of 24 months or less. See CD early withdrawal penalties.
- A CD ladder, so part of your money comes due regularly. See what is a CD ladder?
- A high yield savings account for money you may need any time. See our best high yield savings accounts.
Compare every CD we track, term by term, on our best CD rates page.
Frequently asked questions
What is a no penalty CD?
A CD with a fixed rate that lets you withdraw your money before the term ends without an early withdrawal penalty, usually starting seven days after funding.
Can you withdraw part of a no penalty CD?
Usually not. Many banks, including Marcus, require you to withdraw the full balance, which closes the CD.
Do no penalty CDs pay less?
Often a bit less than regular CDs of a similar length, in exchange for the flexibility.
Why can’t I withdraw in the first week?
Under federal rules, CDs are time deposits; withdrawals in the first six days after deposit carry a penalty of at least seven days’ interest, so banks typically wait seven days.
Is a no penalty CD better than a savings account?
Only if its fixed rate beats what your savings account pays. Savings lets you add money and make partial withdrawals.
Compare today’s top savings rates
Happen Bank LevelUp SavingsAPY as of Oct 23, 20264.20%with $250 or more in deposits each monthReview →
