There are a couple of reasons to jump at the chance to invest in the CIT Bank 11-Month no penalty CD — No penalties AND a 2.05% APY. That’s the highest rate you’ll find right now in penalty-free deposits.
Though you may not often think of them this way, certificates of deposit (CDs) are among the most valuable investments around. They not only pay interest, but they offer 100% safety of principal. If you’re heavily invested in stocks, or other risk related investments, CDs are a perfect allocation in your portfolio, guaranteeing that at least some of your investments will be protected from the inevitable ups and downs of the market.
But CDs come with one major drawback that probably prevents more people from investing in them. That’s the fact that when you invest in a CD, you’re effectively locking your money away for the term of the CD. For example, if you invest in a 12-month CD, you’ll get the benefits of interest income and principal protection–but you won’t have access to those funds for a solid year.
And if you do try to access your money early, you’ll be hit with an early withdrawal penalty, that can eliminate some or all of your interest income on the certificate.
You can partially work around this by constructing a CD ladder. That’s where you create a portfolio of CDs, that mature at different intervals. For example, you might invest $12,000 in 12 one-year CDs so that you’ll have one maturing each month. But building a CD ladder only allows you access to a small amount of your money in any given month. It may also require more cash than you’re prepared to invest.
The other alternative is to invest in a no penalty CD. Several banks now offer no penalty CDs, but the one offered by CIT Bank currently offers one of the highest interest rates available anywhere.
CIT Bank 11-Month No-Penalty CD
Few banks offer no penalty CDs but for the banks that do, 11 months is a standard term. The CIT Bank 11-Month No Penalty CD comes with the following features and requirements:
- Minimum investment: $1,000
- No account or maintenance fees
- Interest compounds daily
- FDIC Insured, up to $250,000 per depositor (including all other deposits held with CIT Bank)
No Early Withdrawal Penalty Terms
No withdrawals are permitted during the first six days after the receipt of funds. But funds can be withdrawn penalty-free beginning seven days after the funds have been received in your certificate.
One important limitation on the no-penalty provision is that early withdrawal requires total liquidation. You will have to withdraw the entire CD, plus accrued interest. There is no ability to make a partial withdrawal. If you only need a small amount of the CD, you’ll have to liquidate the entire certificate.
But in the era of rising interest rates we’re currently in, a total withdrawal of the certificate will be more likely than a partial one. The greater likelihood will be that you will want to withdraw the entire CD in favor of purchasing another at a higher rate of interest.
Speaking of interest, the CIT Bank 11-Month No Penalty CD is being offered with a rate of 2.05% APY.
As you can see from the screenshot above, the CIT Bank 11-Month No Penalty CD is available for custodial accounts, but not for individual retirement accounts.
How Much Money Can a No Penalty CD Save You?
Let’s say you have $50,000 you want to invest for 12 months, and you’re looking at ways to maximize your return over that time frame.
What are the best options with CIT Bank that will earn you the most interest under two different scenarios:
- That you won’t touch the money for a full year, and
- That you will need the money after just nine months?
The three best options to invest your money for 12 months include the CIT Money Market Account, the 11-Month No Penalty CD (which can be rolled over after 11 months), and a 12-Month Term CD. The interest results after one year look like this:
- CIT Money Market Account (1.85% APY) – $925
- 11-Month No Penalty CD (2.05% APY) – $1,025
- 12-Month Term CD (2.50% APY) – $1,250
Winner: 12-Month Term CD
But let’s say that after nine months you want to close out your CD to take advantage of higher rates on new CDs. The interest calculation based on the early withdrawal will look like this:
- CIT Money Market Account (1.85% APY) – $693.75
- 11-Month No Penalty CD (2.05% APY) – $768.75
- 12-Month Term CD (2.50% APY) – $625.00
Winner: The 11-Month No Penalty CD
The money market account has no penalty, so you’ll collect interest for nine months. The 12-Month Term CD is subject to an early withdrawal penalty of three months simple interest. By withdrawing the funds from the CD after nine months, you’ll receive just six months interest (nine months interest, less the three-month early withdrawal penalty).
In fact, the early withdrawal penalty makes the 12-Month Term CD the worst performer of the group, even though it started out with the highest APR by a comfortable margin.
The 11-Month No Penalty CD wins precisely because there is no early withdrawal penalty. You earn interest on the CD for the full nine months, with no reduction in return.
CIT Bank 11-Month No-Penalty CD Bottom Line
As you can see from the examples above, the CIT Bank 11-Month No Penalty CD doesn’t necessarily pay the highest interest rate from the outset. But the flexibility it provides you in the event of a needed early withdrawal can turn it into the highest yielding saving instrument available.
If you’re interested in a no penalty CD, the CIT Bank 11-Month No Penalty CD is well worth investigating. Very few banks offer no penalty CDs, and CIT Bank is currently paying one of the highest interest rates on this type of CD.
If you’d like more information, or if you’d like to open an 11-Month No Penalty CD, visit the CIT Bank website.