What To Do When Your CD Matures

When deciding whether to put money into a certificate of deposit (CD), consider what happens after the CD matures. Certificates of deposit are time deposits that come in specific terms, such as six months or five years. You get a guaranteed, fixed interest rate so long as you hold the CD and leave the money untouched.

However, once your CD reaches its maturity date, you have a decision to make: What do you want to do next with the money in your CD?

Here are a few actions to take and things to consider that can help you decide what to do when your CD matures.

Know Your CD Maturity Date

As the owner of a CD, you are responsible for knowing its maturity date. Mark it on your calendar, set reminders, or do whatever you need to remember this date so you can adjust your plans accordingly. Check with your bank or credit union if you have questions about the maturity date of your CD. The institution will send you a notice before your CD matures.

The maturity date is typically the only time you can withdraw funds from your CD without incurring an early withdrawal penalty—unless you have a no-penalty CD.

What Happens When a CD Matures

When a CD comes up on its maturity date, expect a notice from your financial institution. Your bank or credit union must notify you in writing in advance of your CD’s maturity date to inform you that your CD is about to mature.

Once you receive notice of maturity, you can collect your principal investment and interest earned. You can also choose to open a new CD at the same institution.

Many banks and credit unions also provide a rollover or renewal feature for CDs. If you choose this option, the money you originally invested, and often your interest earned, will be deposited into a new CD.

Know Your CD Grace Period

Once your CD reaches its maturity date, you have a short window of time called a grace period when you can withdraw your money from the CD or put the money into a new CD. The grace varies by institution. While many banks and credit unions offer a grace period of 10 days, others may offer less.

Along with knowing your maturity date, keep track of your CD grace period. Ideally, decide what you want to do with the CD well ahead of its maturity.

What Is CD Renewal?

If you do not withdraw money from the CD after its maturity date, some CDs are set up to renew after a grace period automatically. Generally, this is for the same term, but the interest rate could be higher or lower.  This is why it’s important to note your CD’s maturity date. Before you allow your CD to rollover or renew automatically, compare rates. You may be able to get a better rate and term.

To determine if your CD qualifies for automatic renewal, read the fine print on your bank or credit union’s terms and conditions or deposit agreement.

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Decide What to Do With the Money in Your Matured CD

Once your CD matures and you are within the grace period, you have a few options for what to do with the CD money:

1. Close the CD, withdraw the cash and use the money elsewhere.
2. Put the money into a different CD with a different term and APY.
3. Let the CD automatically renew for the same term (keep in mind that the APY may be higher or lower than it was on the previous CD).

Know What Happens If You Don’t Take Action

If you do nothing, the bank may automatically renew your CD for the same term you had before, at whatever the current APY rate is for CDs of that term.

There are some risks of doing nothing with your matured CD:

• You could get stuck with a longer term than you wanted. For example, if your previous CD had a three-year term, an automatically renewed CD locks you into another three-year commitment. If you want to get your money out of the new CD, you will likely have to pay a penalty for early withdrawal.
• You could miss out on higher rates. During 2022, interest rates on CDs have been inching up. If you purchased a CD a few years ago during a time of low interest rates, you might be surprised at how much more the best CDs pay in the current environment.

Don’t let your money get out of your control. Take advantage of the grace period to make the right moves with your savings. If you’re satisfied with the term lengths and APYs with CDs, consider putting your money into another CD. Make sure the decision is deliberate, well-informed, and based on your larger financial goals.

Figure Out Your Overall Financial Goals for This Money

If you’re going to put money into certificates of deposit, do it strategically as part of your overall savings plan. Every time a CD matures, it’s an opportunity to reevaluate your financial goals and put that money into a different savings account or investment, depending on your financial situation.

Here are some questions to consider when your CD matures:

• Have interest rates increased or decreased since you purchased the CD? You may be able to get a higher APY on a CD from a different bank or with a high-yield online savings account that gives you the same FDIC-insured protection as a CD but without the time commitment. Check the best CD rates and online savings accounts to compare your options.
• Have your goals changed? Think about where you’d like to use the money. Maybe you’d like to use it to bolster your emergency, retirement or home down payment savings.
• How long do you want to commit your money to a CD? Depending on APYs and your financial goals, you may be better off with a shorter- or longer-term CD.
• Are you still happy with the APYs available on CDs? If you can tolerate more risk with this money, you may consider investing some of the funds in higher-risk but potentially higher-yielding investments.

Build a CD Ladder

If you like the safety and stability of this savings vehicle and are satisfied with the APYs, another option after your CD matures is to put more money into CDs by building a CD ladder. This allows you to capitalize on interest rate changes, avoid early withdrawal penalties and save for different financial goals.

You can buy multiple CDs with different maturity dates to create a CD ladder. With a CD ladder, you put together a series of CDs so that a CD maturity date is never too far in the future—giving you more flexibility, even with fixed terms.

Bottom Line

If you have a CD approaching its maturity date, start planning now for what you want to do next with that money. If you wish, you can leave the money alone and let the CD renew automatically for the same term at the current APY. But this can be risky since you could get stuck with a lower APY or a longer term than you would like. Make sure you understand your options and make the right choice for your overall savings plan.

Frequently Asked Questions (FAQs)