Introduction: Early-withdrawal Penalties on Time Deposits

This section will review the rules concerning the penalties that most institutions impose on depositors making a withdrawal from a time deposit prior to its maturity. We will first look at the early-withdrawal penalties themselves. Within this topic, we will study the minimum penalties required by regulation, as well as the actual early withdrawal penalties commonly imposed by most financial institutions and why those penalties are imposed instead of the regulatory minimums. We will also list some guidelines for calculating the early-withdrawal penalties for variable interest rate time deposits.

Second, we will look at the circumstances in which you are permitted by the regulations to allow an early withdrawal without imposing a penalty.

Finally, we will study the requirement that you disclose your early-withdrawal penalty at the time of account opening.

So let’s dive into the first topic, the early-withdrawal penalties themselves.