Support Home Products & Services How does the CD Penalty Work? How does the CD Penalty Work? The penalty is calculated as a forfeiture of part of the interest that has been earned at the dividend rate on the account. Related Questions: What is the minimum opening balance for a CD? Can a member use bill pay if he/she doesn't have a checking account? How is CD interest paid? Do CD’s have compounding interest? What are the daily limits on Debit cards? Was this article helpful? Yes / No