Why No Penalty CDs Are Awesome, and Why You Need One


How do you know if a CD is right for you? There are a lot of options out there, so we’re going to break it down and explain plainly why you should have one.

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Dime — Why No Penalty CDs Are Awesome, and Why You Need One

When we talk about CDs, we aren’t talking about those shiny circular disks we all used to keep in giant binders in our cars. Remember those things? How cool they were once?

We’re talking about Certificates of Deposits. This kind of CD is even better than the musical ones because they don’t cost you money, they earn you money. And they’ll never get replaced by new technology.

But how do you know if a CD is right for you? There are a lot of options out there, so we’re going to break it down and explain plainly why you should have one.

What is a Certificate of Deposit?

A certificate of deposit is kind of like a savings account but with a higher interest rate and a fixed term. Instead of keeping your money in a traditional savings account with a low (or no) interest rate for eternity, a CD allows you to earn more money over a predetermined length of time. CDs are federally insured and are generally pretty low risk.

CDs have terms that range from just a few months to several years, and the interest rates increase accordingly with time. So if you have some funds lying around, doing nothing, and you don’t have any upcoming expenses to use those funds, you could put them in a CD for however long you like (5 months, 2 years, 10 years, for example), and earn a whole lot more.

CDs do usually have a minimum balance to open one, and they can vary based on the term and rate you select. Generally you’ll see a minimum open balance of about $500, though some banks require more. And many do have a cap on the amount of money you can put into the CD. But you should be able to find one that fits your needs.

The only downside to most CDs is that you are penalized if you withdraw your money before the end of term. So if an expense suddenly does come up, and you need to pull your money out of the CD, you’ll have to pay a penalty. Most savings accounts don’t have these kinds of penalties, but they also don’t have these kinds of returns on your investment.

But not all CDs have penalties. Enter the No Penalty CD.

What is a No Penalty CD?

As its name suggests, this is a CD without any penalties. Like this one from Dime Community Bank, you can earn a top rate of 2.25% APY over the course of 14 months with their no penalty CD. And when they say no penalties, they mean it.

All you have to do is keep money in the CD account for the first seven days of the term. After that, if you need to withdraw your money, you can without having to pay any fees. Plus, there are no monthly fees, which is always nice.

So let’s do the math. Say you open this 14-Month No Penalty CD with the minimum balance of $500. At the end of the one year and two months period, you’ll have earned an extra $182.74 for a grand total of $682.74, without having to do anything.

And if you increase that initial deposit? Say you put in $2,000. After 14 months, you’ll have $2,730.97. $5,000? At the end of your term, you’ll have $6,827.42. $10,000? You’re looking at $13,654.83. Now that’s an easy way to earn some money.

Why do You Need One?

If the math above wasn’t enough to convince you, we’re not sure what will. CDs are secure, straightforward, easy to open, flexible (if they’re no-penalty ones), and will help you earn money faster than just about any other account available.

Predetermined term limits make it easy for you to understand how much you’ll be earning when the CD is complete. And most financial institutions have the ability to let you roll your money right into another CD as soon as your first one ends. Now all that money you earned can earn even more, putting all those lazy dollars to work for you.

If you’re looking for a way to increase your savings for the future, or you want to save more faster for a specific goal, a No-Penalty CD is the perfect way to earn money on funds you’re not using.

So what are you waiting for? Plug your headphones into your no-skip CD player and head to Dime.com to open a No-Penalty CD today and start earning.