Callable CDs

A callable certificate of deposit (CD) is a FDIC-insured time deposit that can be redeemed by the issuer before its maturity date. A callable CD offers unique features, like higher interest compared to traditional CDs. Typically issued by a bank, a callable CD is a mildly risky investment. Learn more about the features to determine if it would be a good fit for your investment portfolio.

Lindsey Crossmier, writer for
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    Lindsey Crossmier

    Lindsey Crossmier

    Financial Writer

    Lindsey Crossmier is an accomplished writer with experience working for The Florida Review and Bookstar PR. As a financial writer, she covers annuities, structured settlements and other personal finance topics for

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    Lamia Chowdhury
    Lamia Chowdhury

    Lamia Chowdhury

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    Peggy James, CPA

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  • Updated: February 21, 2023
  • 6 min read time
  • This page features 4 Cited Research Articles
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Key Takeaways
  • Callable CDs are mild risk investments with a higher interest rate compared to the yields paid on traditional CDs.
  • Your insurer can terminate or “call back” your callable CD before the stated maturity date.
  • If your CD is called back, you’ll still get back all your principal and the interest you’ve earned thus far.
  • Callable CDs are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC).
  • You can redeem your callable CD before your maturity date for a fee.

What Are Callable CDs?

A callable CD is an investment option with high interest that’s offered by a bank or brokerage firm. A callable CD gives the bank or firm the option to terminate or “call back” your CD before its maturity date. Your issuer is likely to try to call back your callable CD if interest rates drop suddenly.

If your CD is called back before it reaches maturity, you’ll still receive 100% of your principal, along with the interest earned up to that point. However, you won’t receive any future interest you could have potentially earned.

Pro Tip
Your maturity date and call period are not the same. You may assume a federally insured one-year non-callable CD matures in one year — but it doesn’t. It could have a maturity date 15 to 20 years in the future. Always confirm your maturity date.

Only the issuer can use the call back feature before the maturity date. If you try to access your funds before the maturity date, you’ll face a penalty.

According to a 2022 article from Deposit Accounts, most banks only offer callable long-term and mid-term CDs. Banks are opting for callable CDs to get more financial protection.

Insurers are offering more callable CDs due to fears of unstable inflation and the likelihood of falling rates in the upcoming years. Deposit Accounts drew these conclusions by comparing information from the Federal Reserve and influential banks, such as Ally Bank and Live Oak Bank.


How Do Callable CDs Work?

Callable CDs work similarly to a traditional CD — you deposit money into an account and agree not to make withdrawals for a set period of time. Once the time is up, you get your original money back, along with your interest.

However, with a callable CD, there’s more risk involved. The issuer of the callable CD can choose to “call back” your CD before it matures. Because there’s more risk, you should have a higher interest rate than a traditional CD to make it worthwhile.

According to the U.S. Securities and Exchange Commission, your callable CD is likely to be called back if interest rates decline. If they rise or stay steady, it wouldn’t be beneficial for your issuer to call back the CD.

For example, let’s say you have a $15,000 two-year callable CD that pays 6% interest with a five-year maturity. As your two-year call date nears, the prevailing interest rates drop to 3%. Now your insurer only pays 3% on newly issued two-year callable CDs.

It makes sense for them to save money on paying you interest and to call back your CD. After all, why should they steadily pay the same callable CD at 6% interest when they could be paying half of that at 3%?

Learning the terms below can help you better understand how callable CDs work.

Important Terms To Understand
Callable Date
The callable date, also known as the call date, is the date when your issuer is allowed to call back your CD. Prior to the call date is the non-callable period, where they cannot use the call back feature. Call dates usually occur every six months, allowing the issuer opportunities to call back your CD.
Maturity Date
Your maturity date is how long your issuer is permitted to keep your money. It is not the same as the call date. Callable CDs typically have a maturity date of 15 to 20 years.
Annual Percentage Yield (APY)
APY is the percentage of interest and the rate it compounds within one year.
Your interest is what you earn that is added to your principal. Callable CDs have a higher interest rate than traditional CDs.
Early Withdrawal Charges
If you try to access the money in your callable CD before the maturity date, you’re likely to face fees.

How Are Callable CDs Different from Traditional CDs?

The biggest difference between callable CDs and traditional CDs is the risk of losing potential earnings. With a callable CD, the insurer can call back your CD before its maturity date. Because of that risk, callable CDs are known to offer higher interest rates compared to traditional CDs, according to the Consumer Financial Protection Bureau.

While you will still get your principal and interest you’ve earned thus far — any future interest you could have earned is now gone. Since maturity dates can last decades with a callable CD, there’s a fair amount of room for potential loss.

But remember, the call back feature may not even be enacted. So, you could continue to grow your funds with the high interest of a callable CD. It all depends on the interest rates and what your issuer decides. If interest rates rise, your callable CD isn’t likely to be called back.

If a traditional or callable CD doesn’t fit your needs, there are other types of CDs you can consider.

What Are the Pros and Cons of Callable CDs?

The main pro of a callable CD is its high interest rate, guaranteed return of principal and that it’s FDIC-insured. The biggest con is the risk of losing out on potential interest and having to scramble for other investment opportunities. However, that risk is much lower compared to other investment opportunities.

Remember that no investment is a one-size-fits-all. You should carefully weigh the pros and cons of a callable CD before moving forward.

Pros & Cons
Pros Cons
Low risk compared to other investing opportunitiesCould risk losing potential interest earnings if the CD is called back before maturity date
Higher fixed interest rate compared to a traditional CDWill have to prepare an alternative investing plan in case your issuer calls back the CD
Guaranteed to get 100% of your principal and some (if not all) of your interest backCould face penalty fees if you try to access your money before the maturity date
FDIC-insured up to $250,000

Who Are Callable CDs Best Suited For?

A callable CD would be best suited for an individual looking for a medium-risk investment with high interest that’s insured by the FDIC. You should have an alternative plan set in place in the instance that your CD gets called back early.

If you don’t want to set up a backup investment plan, you could consider a traditional CD instead. Just know you won’t be getting as high of an interest rate, since the risk is lower.

Below are examples of three individuals with different financial goals, along with what they should consider.

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Last Modified: February 21, 2023

4 Cited Research Articles writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. Tumin, K. (2022, December 7). CD Deals Summary. Retrieved from
  2. Kilroy, A. (2022, July 20). Read This Before Investing in Callable Certificate of Deposits. Retrieved from
  3. U.S. Securities and Exchange Commission. (2022). Callable CDs. Retrieved from
  4. Consumer Financial Protection Bureau. (2017, January 4). The Interest Rate Offered for CDs (Certificates of Deposit) Is Low. Is There Anything I Can Do About That? Retrieved from