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Conference nyoss1::market_investing

Title:	Market Investing

Moderator:	2155::michaud

Created:	Thu Jan 23 1992
Last Modified:	Thu Jun 05 1997
Last Successful Update:	Fri Jun 06 1997
Number of topics:	1060
Total number of notes:	10477

889.0. "Question on CD/Cashing/Penalty/Tax" by TLE::PERARO () Mon Jul 17 1995 14:21

    
    
    Hello,
    
    I have a friend who wants to cash in a CD.  The CD was just renewed a
    month ago and it is for about $4000.
    
    What is the penalty for doing this?  Will she have to pay a penalty and
    then be taxed on it and when?
    
    Any information will help.
    
    Thanks,
    
    Mary

T.R	Title	User	Personal Name	Date	Lines
889.1	Call the bank for details	TLE::ptrpan.zko.dec.com::kimball	Keith Kimball	`Mon Jul 17 1995 16:05`	26
	Mary, If your friend doesn't have paperwork from the bank describing the penalty for premature withdrawl of the CD, he/she could simply call the bank for details. This is the only definitive answer to your question. The penalty could be different between banks, although most banks charge as much as the government will let them get away with. Typically the penaly is something like forfeit up to 3 months interest and recalculate the remaining interest at a lower rate. Two things your friend might investigate with the bank: 1. Withdrawing only part of the money. 2. Borrowing the money using the CD as collateral. The rate will probably be 1-2 percent over the CD rate. From the bank's perspective, this is a great deal as it makes 1-2% with no risk. I believe that the forfeited interest is reported as interest income but it's easy to deduct it from your tax return. Keith
889.2		GUIDUK::ONO	The Wrong Stuff	`Mon Jul 17 1995 16:11`	7
	If the CD was renewed a month ago, you'll give up that month's interest. With today's interest rates, that should be $20 or so. You shouldn't lose principal. As mentioned in .1, look at the paperwork or call the bank. Wes