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The Top 7 Second Chance Bank Accounts

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Some banks don’t like giving second chances to customers who have less-than-stellar financial histories, especially since it could expose them to expensive risks. A record of bounced checks or debit card overdrafts could easily lock you out of the conveniences of modern banking.

Fortunately, banks also like making money, and some offer special “second chance” accounts that minimize their risk while allowing consumers to stay in the banking system. A second chance bank account gives customers with troubled records a fresh opportunity to demonstrate they can bank responsibly.

When it comes to a second chance account, fees are an unfortunate reality. But some accounts offer customers a better deal than others, and we’ve researched our database to find the second chance accounts with the most reasonable fee structures, while also factoring in whether they provide online and mobile banking, and how accessible accounts are throughout the country.

Second chance account basics

With a second chance bank account, customers shut out of traditional bank accounts get the opportunity to win their way back into a bank’s good graces. Similar to credit bureaus, financial services company ChexSystems maintains records of consumers’ banking histories. Bounced checks, overdrawn accounts or instances of fraud can all end up on your ChexSystems record; if you accumulate enough black marks on ChexSystems, banks could deny your application to open a new account.

Because second chance accounts are meant for customers who have demonstrated bad banking behavior, some lack features of traditional accounts, such as overdraft protection. In the eyes of the bank, you represent too much of a risk for them to extend you such courtesies.

Nobody likes paying fees, and we generally advise consumers to avoid needless banking fees due to the many fee-free banking options available. But fees are the price you pay for access to banking when you have a poor record. Plus, the second chance accounts listed below give you access to online and mobile banking, which is always a plus.

The 7 best second chance bank accounts

1. Tie between BBVA Compass ClearConnect Checking and BBVA ClearChoice Free Checking

BBVA Compass

Regional bank BBVA’s Compass ClearChoice Free Checking product is available as a second chance bank account. Keep in mind that it’s only available to residents of the states where BBVA maintains physical branches: Alabama, Arizona, California, Colorado, Florida, New Mexico, and Texas. But if you don’t live in those states, you can still avail yourself of BBVA’s Compass ClearConnect Checking account (unless you live in Alaska and Hawaii, in which case you are out of luck).

ClearChoice Free Checking features:

  • Free online and mobile banking, free customized alerts, free online and paper statements, and a free debit card (with option to personalize)
  • $25 minimum deposit to open
  • No monthly service charge to worry about

Fees to watch out for:

  • BBVA ATMs are free, otherwise a $3 fee will apply
  • $38 insufficient funds fee ($32 in California)
  • $15 deposit item returned fee
  • $32 stop payment fee made over the phone or in person ($30 in California); $25 if made online
  • No fee for closing your account within 180 days of opening

You can get a full list of Compass ClearChoice fees for each state here.

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on BBVA Compass’s secure website

Member FDIC

ClearConnect Checking features:

  • Free online and mobile banking
  • Minimum deposit of $25 needed to open the account
  • No monthly service charge

Fees to watch out for:

  • No fees for using any of the 55,000 BBVA and Allpoint ATMs, but for ATMs outside the network a $3 fee applies
  • $38 insufficient funds fee ($32 in California)
  • $15 deposit item returned fee
  • $32 stop-request fee when made over the phone or in person at a branch ($30 in California); a $25 fee to make the stop-request online
  • $25 account close fee if made within 180 days of opening

You can get a full list of Compass ClearConnect fees broken down by state here.

LEARN MORE Secured

on BBVA Compass’s secure website

Member FDIC

2. Wells Fargo Opportunity Checking and Savings Accounts

Wells Fargo Bank

Wells Fargo’s Opportunity Checking and Savings Accounts are tailor-made for folks with a lackluster credit or banking history. With a $25 opening deposit, you’ll get access to a second chance bank account that offers most of the bells and whistles of a traditional bank account. The account does come with a monthly fee, although it’s possible to waive it if you meet a few requirements (see below).

Account features:

  • $25 minimum deposit to open
  • Free transfers are available between Opportunity Checking and Savings accounts
  • You can choose to opt into overdraft protection
  • Free access to bill pay
  • “My Spending Report with Budget Watch” is available if you want to pay extra attention to where your money is going
  • Free debit card with access to more than 13,000 Wells Fargo ATMs throughout the country

Fees to watch out for:

  • $10 monthly service fee, waived if any of the following are true:
    • You make 10 posted debit card purchases or payments
    • You keep a minimum daily balance of $1,500 in the account
    • You receive $500 total in direct deposits each statement cycle
  • $35 overdraft and returned item fee
  • $12.50 overdraft protection transfer fee
  • $15 fee for excess activity (exceeding withdrawals from your savings account)
  • 3% foreign transaction fee with your debit card
  • $5 for money orders
  • $31 for stop payments

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on Wells Fargo Bank’s secure website

Member FDIC

3. Woodforest National Bank Second Chance Checking

Woodforest National Bank

This regional bank has a checking account aptly named Second Chance Checking, to help people rejected by other banks access — provided they live in one of the 17 states where a physical branch exists and can meet the $25 minimum opening deposit requirement. Those states are: Alabama, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia, and West Virginia.

Fees to watch out for:

  • $9.95 monthly maintenance fee if you use a direct deposit (or $11.95 without a direct deposit), $3.00 monthly paper statement fee (which can be avoided if you sign up for electronic statements)
  • $9 one-time account set-up fee
  • $2.50 ATM withdrawal fee when used at a non-Woodforest network ATM
  • $15 debit card set-up fee
  • $29 overdraft fee (for each charge)

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on Woodforest National Bank’s secure website

Member FDIC

4. First National Bank and Trust Company Renew Checking

First National Bank and Trust Company (WI)

First National Bank and Trust Company’s second chance bank account offering is called Renew Checking. You’re eligible for a new account if you live near the bank’s Beloit, Wisc. headquarters, in southern Wisconsin and northern Illinois.

Account Features:

  • No monthly minimum balance
  • $25 minimum deposit to open
  • Free online and mobile banking, bill pay, and e-statements
  • Access to 70,000 no-fee ATMs worldwide through Allpoint and MoneyPass
  • Eligible to upgrade account after twelve months in good standing

Fees to watch out for:

  • $9.95 monthly service fee, or $7.95 with direct deposit
  • $30 early account closure fee (if closed within 90 days of opening)
  • $34.50 overdraft fee
  • $34.50 insufficient funds fee
  • $34.50 stop payment fee

The fee schedule for personal accounts at First National Bank and Trust Company is here.

LEARN MORE Secured

on First National Bank And Trust Company (WI)’s secure website

Member FDIC

5. Peoples Bank Cash Solutions Second Chance Checking

Peoples Bank Cash Solutions

This Texas-based bank offers a second chance bank account that is available nationwide, and so long as you don’t have a record of bank or checking fraud on your record, you should be approved for this account. You’ll need to deposit at least $30 before the bank activates your account and provides you with checks and a debit card.

Fees to watch out for:

  • $4.95 monthly maintenance fee
  • $27.50 overdraft fee
  • $27.50 nonsufficient funds fee
  • $3.95 printed statement fee (which can be avoided with electronic statements)
  • $2.00 ATM withdrawal fee at machines not owned by Peoples Bank
  • $25 stop payment fee
  • $20 account closure fee (if within 90 days of opening account)

LEARN MORE Secured

on Peoples Bank Cash Solutions’s secure website

Member FDIC

6. Radius Essential Checking

Radius Bank

Products from online bank Radius are available to customers nationwide, and accessibility is a strong point in its favor. This second chance bank account only requires customers to deposit $10 to open an Essential Checking account, which is lower than some other accounts on this list.

Account Features:

  • A free debit card
  • 24/7 mobile and online banking
  • Access to Radius’s budgeting and personal finance tracking apps
  • Eligibility to upgrade to Radius’s Reward Checking account after 12 months of positive banking history

Fees to watch out for:

  • $9 monthly maintenance fee
  • $25 per item non-sufficient funds fee (waived on all overdraft items $5 or less)
  • $5 daily overdraft fee

LEARN MORE Secured

on Radius Bank’s secure website

Member FDIC

Alternatives to a second chance bank account

Get a prepaid debit card

Tired of the traditional banking experience? You could opt for a prepaid debit card instead. With a prepaid card, you can load money onto it and spend at merchants that accept major credit and debit cards. But if you try and spend more money than what’s on the card, the transaction is declined — although this prevents you from accruing any overdraft or insufficient funds fees. This is useful if you feel you may still have trouble managing your spending and need an extra layer of security to prevent you from getting into trouble.

Some prepaid cards offer extra perks like advance direct deposit and free ATMs so long as you stay in their network.

Open a secured credit card

You may also have better luck applying for a secured credit card if your credit score is in good enough shape. Usually, this requires depositing cash with the lender, who then gives you the credit card for the same amount. Each month that you make on-time payments, the bank will report that good behavior to the credit bureaus, helping you boost your credit score. At the end of the payment period (generally 12 months, though it varies by banks), you’ll get the full deposit back.

Secured cards can come with high interest rates and many don’t feature the enticing rewards other high-end cards do, but they get the basic job done for consumers who don’t need a card with a high credit limit.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at erinm@magnifymoney.com

James Ellis
James Ellis |

James Ellis is a writer at MagnifyMoney. You can email James here

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Best of

Best Checking Accounts With No Overdraft Fees

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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If you’ve ever spent more money than you had in your checking account and got slammed with overdraft fees, you know how quickly they can drain your wallet. You might not even realize you’ve overdrawn your account and keep racking up additional charges before it hits you.

Tired of worrying about overdraft fees? We’ve combed our database to find seven banks that either don’t charge overdraft fees, provide a simple, no-charge method of overdraft protection, or decline transactions so you don’t overdraw in the first place.

Here are the best banks we can find with no overdraft fees:

Axos Bank Rewards Checking

Rewards Checking - 3 QualificationsThis rewards checking account from Axos Bank — formerly known as Bank of Internet USA — has no overdraft or non-sufficient funds fees. Beyond that, the account grants up to 1.25% APY so long as you meet the following requirements:

  • Monthly direct deposits of $1,000 or more earns 0.42%
  • Using your debit card 10 times per month (provided those transactions are at least $3 each) earns an additional 0.42%
  • Using the debit card 15 times per month earns yet another 0.42%

The account’s APY, combined with its lack of maintenance fees and required minimum monthly balance, makes it an attractive option for high-frequency users.

Learn More Secured

on Axos Bank’s secure website

Member FDIC

nbkc bank Personal Account

Personal AccountBased in the Kansas City metro area, this bank offers customers nationwide online access to its Personal checking account. For a mere $5 opening balance, you get a checking account with complimentary online banking, a box of paper checks, bill pay, e-statements and more — and most importantly for this list, there’s absolutely zero overdraft fees.

While using any of the approximately 32,000 ATMs in the bank’s network is free, you will have to pay whatever ATMs outside of its network charge per use. But nbkc commits to reimbursing $12 of those fees every month, so that should take some of the sting out.

Learn More Secured

on nbkc bank’s secure website

Member FDIC

Simple’s Safe-to-Spend checking features

Simple Checking AccountLike Axos Bank, Simple’s checking account doesn’t charge for overdraft fees or returned item fees. There are no minimums, no monthly fees, and you get access to 40,000 fee-free ATMs.

Simple’s an online-only bank built with mobile in mind, meaning that while you can access most of its features from your computer, the bank recommends you conduct your business via its smartphone app.

Overall, Simple offers a different kind of banking experience, as it provides tools to help you manage your money. With its “Safe-to-Spend” program, Simple takes into account any upcoming bills or scheduled transfers you have, and does the math and tell you what you can afford to spend. You can also track your financial goals within its mobile app.

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on Simple’s secure website

Chime spending account

Checking AccountAnother online mobile bank, Chime doesn’t charge customers overdraft fees for a very simple reason — it doesn’t allow people to overdraw their accounts in the first place. Like some of the other banks on this list, Chime will decline a transaction that would plunge a customer’s account into a negative balance.

As with other online-only banks, you sacrifice the convenience of being able to stroll strolling into a local branch for the elimination of fees charged by traditional banks. The lone exception is a $2.50 for over-the-counter cash withdrawals or using an ATM not part of its 38,000 machine network.

Learn More Secured

on Chime’s secure website

Member FDIC

Aspiration Spend and Save Account

Aspiration AccountIf you’re willing to take a risk on a non-traditional bank that charges zero fees, then look no further than the Aspiration Spend and Save account. Online-only bank Aspiration markets itself as a financial institution for the globally-conscious client, and as part of their ethos refuses to charge fees for anything — including overdrafts.

You do need to deposit an initial $10 to open the account, but once you’re set up the only fees you pay are the ones you voluntarily give to Aspiration, 10% of which are donated to charity. Even better, the account boasts a 2.00% APY and free access to every ATM in existence.

Learn More Secured

on Aspiration’s secure website

Ally Bank Interest Checking Account

Interest Checking AccountThere is no overdraft fee when you have an Ally Interest Checking account, if you enroll in overdraft protection. You can enroll in overdraft protection by linking an Ally savings or money market account to your checking account, and funds will be moved from the linked account to the checking account in $100 increments.

If you chose not to enroll in overdraft protection, Ally charges a once-a-day overdraft fee of $25. That means if you have more than one overdraft item in a single day, the most you’ll be charged is $25 – you won’t get charged a fee every time an overdraft occurs. Of course, Ally will continue to charge you this $25 fee each day your account balance remains negative, so it’s in your best interest to rectify the overdraft as soon as possible.

On the plus side, there aren’t any maintenance fees, there’s no minimum to open an account, and there are no fees incurred when transferring money to a non-Ally bank account.

Learn More Secured

on Ally Bank’s secure website

Member FDIC

Fidelity Cash Management Account

Cash Management AccountThe Fidelity Cash Management Account promises “all the features you need from a traditional checking account, without the bank fees.” Fidelity holds true to this promise with no overdraft fees, and opts to decline transactions that would put you in overdraft by default.

However if you enroll in the account’s free Cash Manager program, you can link a savings or brokerage account to your cash management account. Funds will automatically be transferred (up to $99,999.99 per day) to cover a pending transaction if you don’t have enough in your account, but there’s no option to open a line of credit (an overdraft option we’ll discuss later).

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on Fidelity’s secure website

Member FDIC

Learn more

What happens if you incur multiple overdraft fees in a day?

At many banks, overdraft fees aren’t always a simple one-time charge. If you aren’t paying attention, you could keep charging your debit card for multiple transactions before realizing you’ve been spending money you don’t have. Depending on the bank’s policy, each overdraft instance may incur its own fee, and there are varying limits on how many fees a customer can get hit with in a single day. Wells Fargo, for example, charges an overdraft fee of $35, with a cap of three charges per day, meaning a customer could be on the hook for up to $105 in fees in one day.

Avoid paying triple-figure fees by knowing when your checking account is running low or by taking swift action once you realize you’re in overdraft territory. The best way to do this is to sign up for account alerts with your bank. Many financial institutions will alert you via email or text (or both) if your account’s balance falls below a certain amount.

Remember, you may think you’re safe but have failed to take into account automatic payments set up for expenses such as utility bills, Netflix, etc. Make sure you keep more than you think you need in your checking account, if possible.

Why you might want to opt out of overdraft protection

Plenty of banks provide overdraft protection services to help provide support to customers who find themselves in an overdraft situation. These banks usually offer protection in one of the following ways:

  • Linking another account to your checking account. Some banks, including Axos and Ally on this list, offer an overdraft protection service where you link a savings or money market account to your checking account. If you make a transaction that would cause an overdraft, money from this backup account would transfer to your checking account to cover the cost.
  • Offering an overdraft line of credit. If you make a purchase that exceeds the amount of money in your account, the financial institution will cover the amount you owe and treat that sum as a loan, on which you’ll have to pay interest and (probably) a fee.

Of the two methods, linking your checking account to another account presents less risk. Taking an overdraft line of credit means paying interest, and if you can’t correct the overdraft in a timely matter, you could find yourself owing more than you originally bargained for, thanks to snowballing interest payments.

While overdraft protection allows you to make your purchases and provides a way to cover the difference, it often comes with a price. Banks can charge fees for transferring funds between linked accounts, for example, which you may want to avoid.

By opting out of overdraft protection, most banks will simply decline to process transactions that your account balance can’t cover. That’s great if you’re trying to buy a pair of sneakers and don’t want to get hit with fees, but if you need to make an emergency purchase, you could find yourself in trouble.

The bottom line

Overdraft fees are expensive and annoying. Buying an item that costs $5 and getting hit with a $27 fee is a pointless expense. Incurring bank fees like this means you’re essentially throwing money out of the window. If you’re prone to overdrawing your account, plug that leak by signing up with one of these seven no-overdraft-fee checking accounts.

promo-checking-wide-v2

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

James Ellis
James Ellis |

James Ellis is a writer at MagnifyMoney. You can email James here

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Best of

The Best No-Penalty CD Rates

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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CDs, or certificates of deposit, work under an easy-to-understand premise: You agree to place your money with a bank or credit union for a set amount of time, during which it will earn interest. At the end of the period, you get your money back plus a nice chunk of interest earnings. But if you withdraw money from your CD before the term expires — or before the CD “matures,” in financial parlance — the institution will charge you a penalty fee for breaking the terms of your agreement.

Generally depositors understand that they can’t touch their funds while they’re in the CD account. But the accounts below are special CDs that let customers withdrawal money from a CD account with no penalty charge at whatever time they want. No-penalty CDs aren’t generally widespread, but we’ve selected the best of these accounts available nationwide, based on the following criteria:

  • An APY of at least 1.8%
  • No penalties for early withdrawal of funds
  • Available across the nation

The best no-penalty CD rates in March 2019

1. PurePoint Financial

TermAPYMinimum balance to earn the APY
11-month2.15%$10,000
13-month2.60%$10,000
14-month2.25%$10,000

The online arm of Union Bank offers the best APY among the no-penalty CD accounts reviewed, which makes it a no-brainer — assuming you have the $10,000 needed for the minimum deposit. PurePoint’s sweet spot is the 13-month term no-penalty CD account, which offers an APY of 2.60% that trounces the 2.35% offered by its closest competitor in this space.

This no-penalty CD accounts come with the usual caveats — you can’t make any partial withdrawal of funds, and you have to wait seven days after your initial deposit before withdrawing. However, if you have the sizable chunk of change needed to open one of these accounts, you’ll earn some of the highest APY for your money.

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on PurePoint Financial’s secure website

Member FDIC

2. Marcus by Goldman Sachs®

TermAPYMinimum balance to earn the APY
7-month2.25%
$500
11-month2.30%
$500
13-month2.35%
$500

Marcus by Goldman Sachs stakes a strong claim to offering the best no-penalty CDs around, requiring a mere $500 deposit for customers to start earning APYs well above 2%. As with almost every CD, the longer the term the higher the APY, which is why the 13-month CD earns 2.35% as opposed to the 7-month CD’s 2.25%.

Interested customers should be aware, however, that like other no-penalty CDs on this list, the accounts offered by this bank lock in your money for seven days after you deposit. You can’t open a 7-month no-penalty CD on Monday and take out your money on Wednesday (if you needed to for whatever reason).

In addition, these accounts don’t allow any partial withdrawals of the principal. If you deposited $1,000 in an account and want to withdrawal money before that CD matures, you won’t be hit with any penalties — but you have to take out all $1,000 and your account will then be closed.

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on Goldman Sachs Bank USA’s secure website

Member FDIC

3. My eBanc

TermAPYMinimum balance to earn the APY
11-month2.30%$10,000

This Florida-based online savings bank may go by a somewhat generic name, but it’s a division of BAC Florida Bank, a financial institution with more than 45 years of history. The no-penalty CD offered here is called the Flex Time Deposit, and if customers have the $10,000 to open an account, they can earn an APY of 2.30%, which ranks among the best of the accounts on this list.

Where this account truly shines is that it allows for two partial withdrawals of your funds without having to close your CD account entirely (as long as the balance still remains at $10,000 or more). All of the other no-penalty CD accounts on this list require you to withdrawal all of the principal and any interest earned. The flexibility offered by My eBanc’s account, coupled with its competitive APY, make it one of the top choices for no-penalty CD accounts.

4. Ally Bank

TermAPYMinimum balance to earn the APY
11 months1.80%Up to $5,000
11 months2.15%$5,000
11 months2.30%$25,000

Online-only bank Ally offers a single no-penalty CD account with an 11-month term that earns more APY depending on how much you deposit. Because it has a low minimum balance requirement, this account will attract consumers without a lot of money to spare who still want a no-penalty CD. Of course with modest minimum balances comes an APY to match — the 1.80% earned in this account’s bottom tier is among the lowest listed in this roundup.

Similar to all of the other products listed, this Ally no-penalty CD account makes you wait for the seventh day after the initial deposit to withdraw your funds, and the bank doesn’t allow for partial withdrawals. The bank also offers what it calls its 10 Day Best Rate Guarantee, promising that if depositors fund this CD within 10 days of opening it, Ally will make sure the account earns the highest rate available should the bank change its rate within that 10 day period. It’s by no means a game-changer, but a nice bonus to avoid feeling left out if you deposit a pile of money in your CD on Thursday, only to discover on Friday that Ally hiked its rates.

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on Ally Bank’s secure website

Member FDIC

5. Chartway Credit Union

TermAPYMinimum balance to earn the APY
12-month share certificate2.20%
$500

This credit union may be based in Virginia Beach, Va., but you can potentially become a member, so long as they meet one of the following conditions:

  • You reside or go to school or a place of worship in one of the areas served by a local branch of the credit union. Currently, Chartway Credit Union operates branches in the states of Florida, Texas, Utah and Virginia.
  • You have a family member who’s already a Chartway member
  • You or someone in your immediate family works at a company that utilizes Chartway’s financial services for its employees
  • You make a $10 donation to the We Promise Foundation, a charity founded by the credit union.

Once you’re a member, you can open a 12-month share certificate. Doing so requires a minimum deposit of $500, on which you’ll earn an APY of 2.20%. As with all the other no-penalty CD accounts listed, you can’t make a partial withdrawal of your funds — it’s all or nothing.

LEARN MORE Secured

on Chartway Federal Credit Union’s secure website

NCUA Insured

6. CIT Bank

TermAPYMinimum balance to earn the APY
11-month 2.05%$1,000

If you have the $1,000 minimum deposit for this no-penalty CD account, CIT Bank will give you a rate of 2.05% APY on an 11-month term. While that’s not as much as the 2.30% earned with the comparable CD at Marcus by Goldman Sachs, the deal offered by CIT could provide a decent alternative.

Still, despositers determined to save with CIT Bank may want to look at some of its non-CD products, particularly its Savings Builder savings account. Customers can earn 2.45% APY by opening the account with a $100 deposit and making an additional deposit of at least $100 every month. Alternatively, if you have $25,000 to park in a savings account, you can just deposit it in the account and reap the same APY.

LEARN MORE Secured

on CIT Bank’s secure website

Member FDIC

Honorable mention: AgFed

TermAPYMinimum balance to earn the APY
6 months1.80%
$1,000
12 months2.55%
$1,000
18 months2.65%
$1,000
24 months2.85%
$1,000
36 months2.95%
$1,000
48 months3.05%
$1,000
60 months3.15%
$1,000

AgFed offers a range of CDs whose estimated APY rates vary depending on term. Terms range from six to 60 months, and the minimum initial deposit is $1,000.

AgFed’s CDs do levy substantial early withdrawal penalties, but there’s a loophole: a single withdrawal can be made during the original term of the certificate without a penalty being imposed. Any additional withdrawals will, however, be subject to their penalties, which vary based on the term of the CD but sometimes mean forfeiting all of your interest earnings.

LEARN MORE Secured

on AgFed Credit Union’s secure website

NCUA Insured

Learn more: Is a no-penalty CD worth it?

According to Ken Tumin, our in-house savings expert and founder of LendingTree-owned DepositAccounts.com, no-penalty CDs aren’t a bad option since there isn’t really much risk to trying one out. Just aim to find the longest term no-penalty CD deal you can since the rates will generally be higher.

“When the bank has your money for longer, they’ll usually offer a higher interest rate — and that interest will have more time to compound,” Tumin says. “So if you open a no-penalty CD, you should go for the one with the longest term possible. The rates will likely still be higher, and after all, if you decide to take the money out early, it’s no problem.”

Also, look for no-penalty CDs that offer the benefit on full withdrawals. Some banks only allow penalty-free partial withdrawals, Tumin warns.

Building a CD ladder to avoid withdrawal fees

If you’re interested in using CDs while still maintaining access to your funds, there’s another approach you could consider: building a CD ladder.

It’s can be a complicated strategy, but in short, you split your deposit up into smaller chunks and open several CDs with various term lengths. When the CDs reach maturity, you can renew the account and lengthen the term or withdraw the money if you need to. This way, you can take advantage of higher interest rates while still avoiding early withdrawal fees.

For a step-by-step guide to building a CD ladder, check out our guide linked above. And for even more savings strategies and tactics, keep your eye on the blog. We’re always reviewing the latest financial products and accounts to help you find the best solutions for your money.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

James Ellis
James Ellis |

James Ellis is a writer at MagnifyMoney. You can email James here

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