Early withdrawal penalty
An early withdrawal penalty is what a bank charges for taking money out of a CD before it matures, usually stated as a number of days' or months' interest, such as 90 days' interest.
If you haven't earned enough interest to cover it, the rest comes out of your deposit. Federal rules require at least seven days' simple interest on withdrawals in the first six days. The penalty is deductible on your federal return.
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Related terms
Sources: eCFR: Regulation D, 12 CFR 204.2