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Why are there penalties for withdrawing funds from your certificate of deposit before the maturity date?

Certificates of deposit generally pay a higher rate of interest than similar type bank accounts. They pay a higher rate because they have a fixed maturity date that for the most part guarantees the bank has the ability to use these funds for investment and lending activities. One way the bank can make sure that most customers will not withdraw their money early and cause potential imbalances in the banks costs of funds to invest and lend is to charge a penalty fro early withdrawal.

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Why are there penalties for withdrawing funds from your certificate of deposit before the maturity date?

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