CD Early-Withdrawal Penalty [Video]

Investors have many options available to save their cash. Some come with high risks while others are fairly secure. Among low-risk investment options is the certificate of deposit (CD). It allows you to deposit a lump sum and earn a certain amount of interest at the same time.

There is no risk to CDs and they are insured by the Federal Deposit Insurance Corporation (FDIC). But there is a trade-off though: You must keep your money locked up for a certain amount of time to reap the benefits. Making an early withdrawal, though, could result in a loss of interest. But that’s not all.

There are generally fees for taking your cash out of a CD before the maturity date This is referred to as a CD early-withdrawal penalty. But there may be ways to avoid paying this penalty. Here is how they work and what you can do to avoid them.

When you buy a certificate …