What is the consequence of early withdrawal from a time deposit account?

When withdrawing funds from a time deposit account, which typically has a fixed term, it is common for financial institutions to impose a penalty for early withdrawal. This penalty is designed to discourage account holders from accessing their funds before the agreed-upon maturity date, as time deposits are structured to provide a certain interest rate in exchange for keeping the funds deposited for a specified period.

By imposing a penalty, banks ensure that they can manage their cash flow and that the account holders adhere to the terms of the deposit. The amount of the penalty can vary based on the institution's policies and the length of time the funds were held before withdrawal. In contrast, the other choices do not accurately reflect standard practices regarding early withdrawal from time deposit accounts, as penalties are typically a necessity tied to the agreement made when the account was opened.