Is There a Grace Period to Change My Mind After Opening a Certificate of Deposit?

by Ciaran John ; Updated July 27, 2017

The grace period on a certificate of deposit lasts between seven and 10 days and occurs at the end of the CD term. You do not have a grace period at the start of a CD term during which you can change or cancel your CD. CD terms last between a few days and several years. Generally you must wait until the CD matures to access your funds without paying a penalty. However, banks do allow customers to access funds prematurely on certain kinds of CD products.

Penalty-Free CDs

Some banks and credit unions sell certificates of deposit that work similarly to savings accounts. These CDs have term times and fixed interest rates but are similar to savings accounts in that you have the ability to withdraw principal or interest at any time without paying a penalty. Typically, banks call these CDs either "risk-free" or "penalty-free" CDs. The interest rates are lower than on standard CDs, but you do have the ability to change your mind after purchase and withdraw funds.

Option CDs

When CD interest rates are low, some banks sell CDs called option CDs. These products have a fixed interest rate but provide account holders with the option to change the rate at least once during the term time. You can ask the bank to increase your rate if the rates offered on similar CDs rise after you buy your CD. In addition to bumping up the rate on an option CD, you normally have the option to make a one-time additional deposit and a one-time withdrawal. You can therefore exercise your withdrawal option to withdraw money if you regret your decision to buy the CD.

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Individual Retirement Accounts

The Internal Revenue Service tax code includes a provision for people who own Individual Retirement Accounts to have a seven-day right of rescission after establishing a new IRA. If you open an IRA CD you can change your mind and receive a full return of principal during the first week after you establish the account. However, you forfeit any interest earned during that period. If you make a withdrawal after seven days you must pay the regular bank penalty for premature withdrawals.

Penalties

Federal law requires your bank to charge you a penalty equal to seven days of interest if you close a CD within six days of purchasing it. After six days, banks can set penalties at any level as long as the penalties exceed seven days of interest. Most banks charge three months of interest as a penalty for withdrawals during the first six months and a minimum of six months interest as a penalty for later withdrawals.

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