You can sell a CD before maturity, but the mechanics depend on what kind of CD you hold. A traditional bank CD comes out through an early withdrawal that costs you a set number of months of interest. A brokered CD has to be sold to another investor on the secondary market, at whatever price the market will pay that day. Neither route is free, and one of them isn’t even guaranteed to work.
Bank CDs: The Early Withdrawal Penalty
When you opened your CD, the bank had to disclose the exact early withdrawal penalty in writing before you signed.1eCFR. 12 CFR 1030.4 – Account Disclosures That document, often called the Truth in Savings disclosure, is where the real number lives. Pull it up before you call the bank.
Penalties are not standardized. Each bank picks its own formula, and the math usually involves forfeiting a set number of months of interest. A one-year CD might cost 90 days of interest to break; a five-year CD might cost 150 or 180 days. Federal rules set only one floor: if you withdraw within the first six days after opening the account, the penalty has to be at least seven days of interest.2eCFR. 12 CFR Part 1030 – Truth in Savings (Regulation DD) Beyond that, banks have wide latitude.
Here is the part most people miss. The penalty comes out of earned interest first, but if you haven’t earned enough interest yet to cover it, the bank deducts the shortfall from your principal. You get back less than you deposited. Breaking a CD early in its term is the scenario where that happens, and it turns early withdrawal from an annoyance into a real loss.
When the Penalty Is Waived
Federal rules force banks to waive the penalty in two specific situations: the death of an account owner, and a court determination that an owner is legally incompetent.3eCFR. 12 CFR Part 204 – Reserve Requirements of Depository Institutions (Regulation D) In those cases, you or the estate can withdraw without paying anything.
Outside those two, banks sometimes waive penalties on their own during broad financial hardship. The FDIC encouraged that during the COVID-19 pandemic for customers affected by closures, slowdowns, or illness.4Federal Deposit Insurance Corporation (FDIC). I Need to Withdraw Money From My Certificate of Deposit (CD) There is no legal requirement to grant a hardship waiver in normal times, but asking costs nothing.
The third free exit is the one closest to your CD’s finish line. Federal rules give you at least ten days after maturity to withdraw without penalty even on an auto-renewing CD.3eCFR. 12 CFR Part 204 – Reserve Requirements of Depository Institutions (Regulation D) Most banks provide a grace period of seven to ten days. If you are within a few weeks of maturity, waiting almost always beats paying.
Brokered CDs: Selling on the Secondary Market
Brokered CDs work differently. You bought yours through a brokerage account, and the issuing bank typically won’t let you withdraw early. Instead, you sell to another investor on the secondary market, the same way you’d sell a bond. Your brokerage lists the CD for sale to other clients or counterparties.
The price is set by interest rates, not by a penalty schedule. The relationship is inverse. If rates have risen since you bought, your lower-yielding CD is less attractive and sells at a discount. If rates have fallen, your higher-yielding CD is more desirable and can sell at a premium above what you paid.5U.S. Securities and Exchange Commission. Brokered CDs Investor Bulletin The longer the remaining term, the bigger the swing. A CD with five years left reacts more strongly to rate changes than one maturing in six months.
There is a bigger risk than price. There may be no buyer at all. If demand for your specific CD is thin, you may not be able to sell at any price and could be stuck holding it until maturity.5U.S. Securities and Exchange Commission. Brokered CDs Investor Bulletin With a bank CD you can always get out by paying. With a brokered CD the market has to cooperate.
Fees and Settlement
Selling on the secondary market usually triggers a brokerage transaction fee. A common structure runs around $1 per $1,000 of face value, with a minimum near $10 and a cap around $250. Broker-assisted phone trades typically add a flat service charge. New-issue brokered CDs are often commission-free at purchase, so the selling fee catches people off guard. Check the fee schedule before you place the order.
Since May 2024, secondary-market CD sales settle T+1. The cash arrives in your account the next business day after the trade executes. Sell Monday, funds Tuesday. Sell Friday, funds Monday.
Callable CDs Are the Bank’s Option, Not Yours
Some brokered CDs carry a call feature. Only the issuing bank can exercise it. You cannot use the call to get your money out early. Banks tend to call when rates drop. If you locked in 5% and new CDs are paying 3%, the bank would rather stop paying you the higher rate. You get your principal and accrued interest back, then face reinvesting at the lower going rate.6U.S. Securities and Exchange Commission. High-Yield CDs – Protect Your Money by Checking the Fine Print
Tax Treatment
Interest on any CD is taxed as ordinary income in the year it is credited, whether or not you have withdrawn the money. Breaking a CD early doesn’t change that. You still owe income tax on interest earned up to the withdrawal date.
For bank CDs, the early withdrawal penalty is deductible as an adjustment to gross income on Schedule 1 of your federal return. It is an above-the-line deduction, so you get it whether or not you itemize. The bank reports the penalty on Form 1099-INT, and it flows through to your return. That doesn’t make you whole, but it softens the blow.
Brokered CDs sold on the secondary market are treated as investment sales, not deposit withdrawals. Sell for less than you paid and the difference is a capital loss, usable to offset capital gains in the same year. If losses exceed gains, you can deduct up to $3,000 of the excess against ordinary income, or $1,500 if married filing separately, with any remainder carrying forward. Sell for a profit and it’s a capital gain. Gains on CDs held longer than a year qualify for long-term rates of 0%, 15%, or 20% depending on your taxable income.7Internal Revenue Service. Topic No. 409, Capital Gains and Losses
No-Penalty CDs Avoid the Problem Up Front
If you think you might need the money before the term ends, a no-penalty CD sidesteps the whole question. These let you withdraw the full balance without any penalty after an initial holding period, usually seven days from deposit. The rate is lower than a comparable traditional CD, and terms tend to be shorter, often capping around a year. Most no-penalty CDs require you to close the account and take everything at once. Partial withdrawals typically aren’t allowed.
How to Actually Cash Out
For a bank CD, start with your Truth in Savings disclosure to find the exact penalty formula. Contact the bank by phone, in a branch, or through secure messaging and request an early withdrawal. Ask for a payout quote showing your balance minus the penalty before you authorize anything. Most banks process the request within one to three business days, with funds landing in a linked checking or savings account.8CBS News. How Long Does It Take to Get Money Out of a CD Some banks allow partial withdrawals, where only a portion of the CD breaks and the rest keeps earning under the original terms. Not every bank offers this, so ask specifically.
For a brokered CD, log into your brokerage’s trading platform and place a sell order, or call the fixed-income desk to have a representative handle it. Have the CD’s CUSIP number, maturity date, and face value ready. The brokerage will show you the current bid price before you confirm. Funds settle the next business day.
Either way, run the numbers before you commit. For a bank CD, compare the penalty against the interest you would earn by waiting; if you are a few weeks from maturity, waiting almost always wins. For a brokered CD, check the bid price against what you paid and factor in the transaction fee. A small discount can be worth taking if you need liquidity, but taking a steep loss on a CD close to maturity rarely makes sense when holding to full face value is just weeks away.