Certificates of Deposit (CDs) are interest-earning deposit accounts. They are often called “locked” savings accounts because you cannot withdraw your deposit or the interest earned before the term expires without paying penalties.
Callable CDs give the bank more leverage, but you usually get a higher interest rate than standard CDs.
What is a CD?
CDs are deposit accounts with deposit insurance and are a safe way to grow your savings. Typically, you make a deposit, choose a certain term, and earn interest on your deposit for the duration of the term. If you close a CD before the term expires, you will likely pay early withdrawal penalties.
The highest average CD rate is for 12 months at 1.83%, according to the Federal Deposit Insurance Corporation (FDIC). Some types of CDs include traditional CDs, no-penalty CDs, and callable CDs.(1)
What is a recallable CD?
A callable CD is a type of savings account that allows the issuer (bank or credit union) to terminate the CD before its due date, a process referred to as “calling” the CD or using the call feature or call away option.
In short, the issuer can close a callable CD before the actual term expires, unlike a traditional CD, which offers guaranteed returns if you keep it open the entire time.
When the issuer “calls” the CD, you get your initial deposit plus any interest earned up to that point, but you lose the future interest you would have earned if the CD had matured as scheduled.
To compensate for a bank’s ability to terminate CDs early, they typically offer high interest rates—usually exceeding the rates for traditional “non-callable” CDs.
How often are recallable CDs recalled?
Most recallable CDs include a “Call protection period“or”Non-callable period“, which is a specific time frame during which the bank cannot contact the CD. This period usually ranges from six to 12 months, depending on the terms of the CD.
After the protection period expires, the CD goes into a file Callable datewhich is the time during which the bank can terminate it. In most cases, the issuer can contact the CD once every six months to terminate it, but it depends on the issuer.
In most cases, issuers call CDs if rates fall so that they can remain competitive and avoid offering higher rates than other banks. Conversely, if prices rise, the issuer is less likely to terminate the term of the callable CD.
Recallable CDs versus non-recallable CDs
Callable CDs often offer higher interest rates than traditional CDs to compensate for the risk that a bank may call the CD early, especially if market interest rates decline.
If you expect market prices to be stable, a callable CD may be worth the risk. If you’re seeing significant ups and downs in your CD offerings, it could be a sign that your callable CD may end early. If you’d rather avoid this risk, a regular CD may be more suitable for you.
Which banks offer callable CDs?
Recallable CDs are not a very common type of CD, but here are three organizations that offer them:
- raisins. Raisin is a savings marketplace that has partnered with a few banks that offer callable CDs, such as Mph.Bank and SkyOne Federal Credit Union.
- Sincerity. This comprehensive financial institution is known to offer a wide range of intermediate CDs, including callable options.
- E-commerce. E*TRADE, known mostly for stock trading as a brokerage, offers brokerage CDs that may come with a callable option.
Pros and cons of recallable CDs
Callable CDs have their pros, but like most investing and saving methods, they have downsides to consider.
Pros
- They may offer higher prices than regular CDs
- You may get your deposit earnings and interest early without penalty
- The call protection period provides some stability
cons
- Interest earnings are not guaranteed
- More dangerous when prices fall
- More complex terminology than traditional CDs
Compare recallable CD options
Narrow down your callable CD accounts by APYs and minimum deposit. For a better comparison, check the box Compare Check multiple accounts to see their benefits side by side.
What are Finder Points?
Finder Score analyzes hundreds of CDs from more than 100 organizations. It takes into account the product’s interest rate for the terms available and the opening deposit requirements – this gives you a simple score out of 10.
Different banks and credit unions offer CDs for different time periods, ranging from seven days to 20 years. For our ratings, we take into account the duration lengths that the Federal Deposit Insurance Corporation (FDIC) uses in its monthly updates to national rates.
If a bank or credit union doesn’t offer a CD for a specific term used by the FDIC, we don’t penalize it: Instead, we simply don’t rate it. Each of the standard terms has its own APY rating based on average FDIC rates.
Read the full Finder Score details
Bottom line
Recallable CDs are not commonly offered. In most cases, you’ll have to choose a brokered CD with a callable option.
To learn about other ways to grow your nest egg, compare more savings accounts and options.
