Questions and Answers

For historical reasons, most institutions still impose early withdrawal penalties of either three or six month’s interest on certificates of deposit with maturities of more than a year.  However, penalties of this sort are no longer required by federal law.  In fact, the only remaining federal early withdrawal penalty requirements are those contained in Reg. D, which requires penalties only of “at least seven days’ simple interest on amounts withdrawn within the first six days after deposit” and “at least seven days’ simple interest on amounts withdrawn within six days after each partial withdrawal”.  Thus, there is no federal law precluding you from imposing an early withdrawal penalty of just one month’s interest on a 13 month certificate of deposit.

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