Guide to Liquid Certificates of Deposit (CDs)

By Paulina Likos · May 02, 2022 · 9 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Guide to Liquid Certificates of Deposit (CDs)

If you’re looking for a safe but accessible way to grow your money, a liquid certificate of deposit (CD) could be a good option. Managing your money is all about managing risk, and a liquid CD can allow investors to secure interest with very low risk. Granted, returns from liquid CDs may not be as competitive as stock market investments. However, when you’re committing to a liquid CD, you’ll have a fixed, guaranteed payment when the account matures.

If you are the type of investor who is not in the financial position to take on a potential loss, putting your money in a liquid CD for a period may be a suitable option. The best part is, you can access those funds anytime and withdraw money from a liquid CD without paying fees. Here, we’ll take a closer look at liquid CDs and review:

•   What a liquid CD is

•   How to withdraw money from a liquid CD

•   The pros and cons of liquid CDs

•   Alternatives to liquid CDs

What Is a Liquid Certificate of Deposit?

Before you think about investing in a CD, let’s get the terminology clear. A certificate of deposit, or CD, is usually a savings vehicle that gives you a bit of interest with virtually no risk, provided you keep the money in place for a certain term. If, however, you withdraw funds before the CD matures (or reaches the end of its term), you are usually penalized. You will likely lose some or all of the interest earned and perhaps even a bit of the principal.

A liquid certificate of deposit, on the other hand, gives you flexibility. It allows account holders to withdraw money from their account prior to the maturity date without incurring penalties. (You may also hear it referred to as a no-penalty CD, in fact.) This means you can access funds in the CD should you need them, which can provide peace of mind and some real-life help. It’s worth noting, though, that you will probably pay for this privilege: The rates for liquid CDs tend to be lower than other kinds of CDs.

Understanding a Liquid CD

You may be wondering, “What are liquid assets?” Let’s dive in a little deeper. In the realm of finance, the concept of “liquid” means that an asset can quickly be converted to cash. A liquid CD is a time-bound deposit account where you can earn interest for a specific period of time. Compared to traditional CD’s however, liquid CDs will not charge you early withdrawal penalties. This means you can easily liquidate (turn into cash) your CD without taking a hit in terms of its value.

Yes, there’s a “but” to this proposition: Liquid CDs typically pay less than traditional CDs. Depending on which financial institution you go to, these products can offer various terms, either as little as a few months or up to several years or longer. Your fixed interest rate will vary according to the length of the term you’ve chosen. Typically, the longer you hold your money in the liquid CD, the higher the rate of return. The great thing about CD rates is that they are locked in during the full term. This means even if interest rates decrease, your rate would not change. Some financial institutions may require a minimum deposit for these CDs, and they can be significantly higher than traditional CDs; some are at the $10,000 and up level. What’s more, the minimum deposit may go up if you are seeking a higher interest rate. , while others don’t have a minimum deposit requirement.

How Do You Withdraw Money From a Liquid CD?

If you have decided that you need to withdraw from your liquid CD, you need to notify your bank. You will likely have to wait about a week after opening the liquid CD before you can start withdrawing. However, it’s not as quick as withdrawing funds from a checking or savings account; your financial institution might require anywhere from a week to a month to process the transaction. Do check on timing in advance. Also, before you open the account, find out whether you will have to withdraw a certain percentage at a time or whether you need to remove all funds from the account. This can vary depending on the specific account you open.

Liquid CD: Real World Example

Once you have decided a no-penalty CD is right for you, you will need to go to a bank or credit union that offers this account. Once you’ve opened an account, you have to fund it. If you invested $10,000 in a liquid CD with a three-year at a rate of 0.50%, at the end of the three-year period with interest compounded monthly, you will have a total balance of about $10,152.

Get up to $250 towards your holiday shopping.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $250 cash bonus. Plus, get up to 4.60% APY on your cash!1

Pros of a Liquid CD

When evaluating liquid CDs, it’s worthwhile to review the benefits of these accounts. Some of the key upsides are:

•   Liquidity. One of the key selling features of liquid CDs is the ability to access and withdraw your funds prior to the term’s end. Perhaps you’re having an emergency that requires cash, or you decide to move around your money to better meet your financial goals.

•   No penalties. If you dip into the account before it matures, you won’t be assessed a fee.

•   Security. Liquid CDs are safe investments. These accounts are federally insured, so you know your money is protected when you open a liquid CD with a bank or credit union. This is one of the reasons why liquid CDs are considered low-risk investments. Even if a bank falters, your money is still safe.

•   Guaranteed returns. When you start a liquid CD account, you usually know the interest rate upfront. It may not be stratospheric, but it’s a sure thing.

Cons of a Liquid CD

Now that we’ve explored the good things about a liquid CD, we need to give equal time to the potential downsides:

•   Lower rate of return. The interest rates are significantly lower compared to certificate of deposit rates.

•   Withdrawal rules. Yes, these accounts are more accessible, but after your deposit has been in place for a week, your withdrawal guidelines may be quite specific. For instance, you may have to remove all your funds if you want to make a withdrawal, or the amount might be limited to a certain percentage that doesn’t suit your needs. Check before starting a liquid CD investment.

•   Tax implications. Earnings on your liquid CD will be taxed at your federal rate, which is something to keep in mind as that will take your return down a notch.

Alternatives to a Liquid CD

If the idea of a liquid CD doesn’t sound like an appealing low-risk investment option, there are alternatives to also consider.

Traditional CDs

Traditional certificates of deposit require you to stow your money away for a certain period of time. In exchange, you receive a return at the end of that period. The catch is, you are not able to withdraw your funds during this holding period. If you have a financial emergency, for example, and need the money from your CD, you will receive penalties for withdrawing your cash before the period of maturity. However, this might be a gamble you are willing to take, especially if you have a nice, healthy emergency fund set aside. You’ll earn a better rate of return than with a liquid CD.


CD laddering usually involves opening CDs of different term lengths. This strategy allows you to invest long-term CDs which provide higher rates of return, while having the ability to access your funds through a shorter-term CD.

Money Market Account

Another CD alternative is a money market account, which is similar to a savings account with some added benefits. Money market accounts typically require minimum balances and offer rates comparable to savings accounts that can change over time. While the rates may be lower than a CD, money market accounts typically allow you to withdraw and transfer your money six times per month or more.

Emergency Fund

An emergency fund, or a rainy-day fund, is a savings account that should only be used in times of financial emergencies or unexpected expenses. Depending on your financial position, you can have an emergency fund in a regular savings account, money market account, CD, or liquid CD. It depends on how much you plan to access your emergency fund and how much interest you want to earn in the account.

High-Yield Savings Account

A high-yield savings account can offer a competitive rate of interest, depending on the financial institution offering it (online banks tend to pay more than bricks and mortar ones). And you’ll have more liquidity than a CD because you can deposit and withdraw from the account more frequently, though the specifics may vary with each bank. So if you want easy access to your funds, a high-yield bank account may be a good option.

The Takeaway

Liquid CDs are a financial product that offers the safety and guaranteed return of a traditional CD with the bonus of not being penalized if you make an early withdrawal. For those who are comfortable locking their money into a CD but worry an emergency or other need might pop up, this accessibility can be very attractive. Worth noting: Expect lower interest rates from a liquid CD than a standard one, which may or may not sync with your financial goals.

Here’s one great boost when you’re working to achieve your money dreams: Banking with SoFi. Our Checking and Savings account offers a competitive APY rate when you sign up with direct deposit, plus zero account fees. And you’ll even have access to your paycheck up to two full days early.

Better banking is here with up to 4.60% APY on SoFi Checking and Savings.


Are CDs liquid investments?

Traditional CDs are not liquid investments. This means, funds held in a CD cannot be accessed until the account term is reached. If you need to withdraw money from your CD prior to its maturity date, you will have to pay a penalty. A liquid CD, however, offers flexibility to withdraw money from your account prior to its term date without the usual fees.

What is a non-penalty CD?

A non-penalty CD, also known as a liquid CD, is a savings account that offers interest on your money. However, the rate is usually somewhat lower than the rate for a typical CD (the kind with penalties). The longer the term you choose for your liquid CD, the more you usually can earn.

How much is the penalty for early withdrawal from a CD?

Each financial institution has its own way of calculating this, but it usually involves losing some of all of the interest you have accrued. If your CD term is two years and you withdraw funds early from a traditional CD, the fee could be two months’ worth of interest or six months’ worth, according to a recent search. Your bank might be more or less than these figures. If you have a liquid or no-penalty CD, you will of course avoid these fees.

Photo credit: iStock/champc

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store
SoFi Android App, Get it on Google Play

TLS 1.2 Encrypted
Equal Housing Lender