Early Withdrawal Definition

Any withdrawal on a term deposit which occurs before the specified term of the deposit is considered to be an early withdrawal. For example, you open a certificate of deposit at a local credit union and agree to a term of deposit of one year; four months later you decide to spend the money on a new automobile and so withdraw it from the account. Early withdrawal is usually penalized by a loss of all or some significant portion of accrued interest, as well as other penalties. These penalties can be significant and are intended to dissuade depositors from taking an early withdrawal.