Allen Stanford used fraudulent CDs with high rates to lure people into his Ponzi scheme. As in , the most common penalty is still three months' interest for CDs with maturities of less than one year, and six months' interest for CDs with maturities of one year and longer. May or may not reduce the principal—for example, if principal is withdrawn three months after opening a CD with a six-month penalty. For example, you might have a CD mature every three to six months, giving you options. To avoid penalties in the future without predicting the future , you can try to use more flexible options. May be limited to the most recent interest payment or allow for withdrawal of accumulated total interest since the CD was opened. People may also think that the higher-rate situation is "better", when the real rate of return is actually the same. For example, during a credit crunch banks are in dire need of funds, and CD interest rate increases may not track inflation. It is generally accepted that these penalties cannot be revised by the depository prior to maturity. Check with your bank before you buy a CD — and certainly before you cash out early. Of course, a much better idea is to keep a solid emergency fund. Finally, the statement that "CD interest rates closely track inflation" is not necessarily true.
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