Decision guide
CD Early Withdrawal Calculator
Last updated: October 2026
Your CD pays 3%, and a bank down the street now offers 4.25%. Breaking the CD costs a penalty, usually several months of interest. Whether the switch pays depends on one trade: a fixed penalty now against a rate gap that adds up over the months left.
This calculator runs both paths to the date your CD would have matured. It shows which ends ahead, the new rate you need just to break even, and how many months the higher rate takes to earn the penalty back.
Inputs
Your CD, its penalty, and the rate you could get.
Calculating the default example.
A fixed cost against a growing gain
The penalty is paid once, the day you break the CD. The benefit of the higher rate builds month by month until the old CD would have matured. With plenty of time left, a modest rate gap covers the penalty. Near maturity, even a large gap rarely does.
The first result is the difference on the maturity date. A negative number means keeping the CD ends ahead. The second result is the lowest new rate that would make breaking worth it.
Decision checks
The calculator assumes the penalty is months of interest at the CD's rate on the full balance, and that both rates hold until the old maturity date.
How the new rate changes the answer
Every row uses your balance, penalty, and months left. Only the new rate changes. Your rate is highlighted.
| New APY | Keep the CD | Break and Move | Difference |
|---|
How the months left change the answer
Every row uses your rates and penalty. Only the time left on the CD changes. The penalty stays the same while the gain from the higher rate grows with time.
| Months Left | Keep the CD | Break and Move | Difference |
|---|
Example 1: a 3% CD with 18 months left
You hold $20,000 in a CD paying 3.00% APY, with 18 months to maturity and a penalty of six months of interest. That penalty is $300. A new account pays 4.25%.
Keep the CD and it is worth $20,906.72 at maturity. Break it, move the remaining $19,700 to 4.25%, and on the same date you have $20,969.13. Breaking comes out $62.41 ahead. The higher rate takes 16 months to earn back the $300, which leaves two months of real gain.
The margin is thin. Breaking pays only above about 4.04%, and at 4.00% it loses $12.98. If the new rate is a savings rate that could fall, keeping the CD is the safer call.
Example 2: the same CD with 6 months left
Same $20,000, same 3.00% rate and six-month penalty, but now only six months remain. Breaking and moving to 4.25% loses $183.51. To break even, the new rate would need to be about 6.16%.
The penalty is still $300, but there are only six months for the higher rate to make it back. Near maturity, the answer is almost always to wait.
Example 3: an old low-rate CD
Now take a $20,000 CD bought when rates were low, paying 1.50% with 36 months left and a twelve-month penalty. The penalty is again $300, because it is twelve months of a small rate. Moving to 4.00% earns that back in 8 months and ends $1,246.25 ahead at maturity.
Long, low-rate CDs are where breaking pays most. A high-rate CD with a large penalty is the opposite: a 4.50% CD with a twelve-month penalty of $900 loses $748.73 by moving to 5.00% with 30 months left.
Disclosures and taxes
Under Regulation DD, the federal Truth in Savings rule, a CD's account disclosure must include a statement that a penalty will or may be imposed for early withdrawal, how it is calculated, and the conditions for its assessment. Read that section before you rely on any estimate. Some penalties are a flat number of days of interest, and some change the rate on the money left in the account.
For taxes, IRS Publication 550 explains that the penalty is shown separately in box 2 of Form 1099-INT and can be deducted on Schedule 1 of Form 1040. You still report all the interest in box 1. Because the penalty is deductible and the interest is taxable, taxes shrink both sides of the comparison, and the winner rarely changes.
How the comparison is calculated
The penalty is the balance times the CD's APY times the penalty months divided by 12. Keeping the CD grows the full balance at the CD's APY until maturity. Breaking it grows the balance minus the penalty at the new APY for the same months. Both use yearly compounding at each APY, which matches what an APY means.
The break-even rate solves for the new APY that makes both paths equal at maturity. The months to recover the penalty solve for when the smaller balance at the higher rate catches up with the full balance at the lower rate. See the methodology limitations.
Mistakes when switching CDs
- Comparing rates without counting the penalty.
- Ignoring how few months are left on the CD.
- Moving to a savings rate that falls a few months later.
- Assuming the penalty comes only from interest earned. It can reduce principal.
- Forgetting that a partial withdrawal may be allowed, which limits the penalty to the amount taken.
Good fits
- Deciding whether to chase a higher CD or savings rate.
- Finding the minimum rate worth switching for.
- Comparing a short and a long remaining term.
- Checking a bank's offer to move your CD.
Limits
- Brokered CDs, which are sold rather than broken.
- CDs with a penalty that is not months of interest.
- Withdrawals needed for an emergency, where the choice is about access.
- Comparing CDs with Treasury bills after tax. Use the after-tax cash comparison.
CD early withdrawal questions
These answers cover CD penalties and what the calculator assumes.
When does it pay to break a CD early?
When the extra interest from the higher rate, over the months left on the CD, is larger than the penalty. The calculator compares both paths on the date the CD matures.
How is a CD early withdrawal penalty calculated?
Most often as a number of months of interest, such as three, six, or twelve months. The account disclosure from the bank must say how the penalty is calculated and when it applies.
What rate do I need to make breaking worth it?
The break-even rate in the second result. In the main example, a 3.00% CD with 18 months left and a six-month penalty needs a new rate above 4.04%.
Can the penalty cut into my original deposit?
Yes. If the CD has not earned enough interest to cover the penalty, the rest comes out of principal. The calculator takes the penalty from the balance either way.
Is the CD penalty tax deductible?
Yes. The IRS says the penalty appears in box 2 of Form 1099-INT and can be deducted on Schedule 1 of Form 1040. You still report all the interest in box 1 as income.
Does it matter how long the CD has left?
More than anything else. The penalty is fixed, but the gain from a higher rate grows with time. Near maturity, breaking rarely pays.
Should I move the money to a savings account or a new CD?
A new CD locks in the higher rate until the old CD would have matured. A savings rate can drop, so the gain shown here is not guaranteed.
Is this financial advice?
No. It is an educational estimate, not financial or tax advice. Check the penalty terms in your CD disclosure before withdrawing.
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Educational estimate only. This calculator does not provide financial or tax advice. Confirm the penalty terms in your CD disclosure before withdrawing.