I learned the hard way what "substantial penalties for early withdrawal" means on my certificates of deposit. I was given two prizes worth $75 each when I bought two $1,000 CDs. The gifts were reported as interest income to the IRS. Then, when I had to withdraw my cash early, I was charged for the two premiums and actually got back less than I deposited originally. I'm assuming this is all legal, but others should be aware of the penalties. M. P.
For once the regulators simplified rules instead of making them more complicated. Penalties formerly called for loss of interest for three months and then a drop back to passbook rates for the remainder of the time prior to an early withdrawal. Now for any CD that matures in less than one year, the penalty is three month's interest -- even if this means you get back less than you deposited. On CDs maturing over periods longer than one year, the penalty is loss of six months' interest. Although the IRS is counting the value of gifts for depositing sums into a new account at a bank or savings and loan as interest, I am surprised to hear that a bank would charge for the premium on an early withdrawal. Such actions reiterate the oft- heard advice to read the small print of a contract before signing. Learn everything about a plan before accepting it. Charging for the premiums upon early withdrawal was obviously stated somewhere in the agreement.