Question

QUICK I NEED ANSWER ASAP What happens if you decide to cash in your Certificate of Deposit (CD) before its maturity date?

Answer 1

You’ll have to pay a penalty, forfeiting some of your interest

Answer 2

Explanation:

Certificate of deposit is issued for a fixed period with maturity amount and value on it. If closed at the date of maturity as per agreed interest full interest and hence full maturity value will be paid

If before its maturity date it has to be cashed, then the actual time period run from the date of issue to closing date would be calculated. The interest rate for that period run - penalty of 1% for premature closing will be the interest rate paid.

Thus the amount paid will be less than maturity value because of reduction in interest for actual running period and also penalty of 1%