What to do when a CD matures

You can withdraw, renew or reinvest elsewhere

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A certificate of deposit (CD) is a type of savings account offered by banks and credit unions. You deposit your principal into an account for a predetermined period of time, and receive a fixed interest rate for the duration of the term.

Once the term is up, you have a number of options for what to do next. You can:

  • Withdraw your money
  • Renew your CD
  • Put your money into a different CD
  • Open a different type of savings account
  • Invest the funds

You have a grace period after your CD matures, during which you can decide which option is best for you.


Key insights

  • The grace period after your CD matures is only seven to 10 days, so it’s important you stay on top of your CD maturity date.
  • Most banks will automatically renew the CD on your behalf if you do not make a choice.
  • Which option is best is personal to you and will vary based on your risk tolerance and investing timeline.

What does it mean when your CD matures?

When a CD matures, it means the term has ended. When you first opened the CD, you picked a set period of time (the term) in which your money would sit in the account. A few weeks before that time period is up, the bank will send you a notice, either via email or traditional mail, telling you what the terms of the maturation are.

What may be included in this notice is information regarding the CD grace period. The grace period is the period of time — generally between seven and 10 days — during which you have to decide what to do with your money.

Your options for a maturing CD

Once a CD matures, you have a few options for what to do with the money you deposited and the interest you’ve earned.

Withdraw your money
If you put your money into the CD with an eye toward a specific purchase, now would be your opportunity to use the funds. You will need to alert your bank to this decision, and begin the process of withdrawing your funds the way you would for other bank accounts.
Renew your CD
Renewing your CD will probably be the default option for your bank. If you do not tell the bank otherwise, it will automatically roll the money into another CD at the same bank.

You should check the rates being offered at your current bank to see if a renewal to a similar CD is in your best interest or if rates have dropped.

Put your money in a different CD
In the event your bank is offering you CDs with lower rates, it may make sense to move your money into a different CD . Check if available options have better terms — no fees, lower minimums or better rates, for example.

Once you’ve looked at your own bank, check the rates offered by other banks so that you know you’re getting the best rate.

If you’re expecting market rates to go down, it may be a good move to lock in a long-term CD. However, if the opposite is true, going for a shorter term may be more appropriate.

You also have the option to pick from different types of CDs, and to purchase CDs of different durations. Laddering is a process in which you purchase CDs of different term lengths, taking advantage of the different maturation dates. This way, you have the option to renew or withdraw your money at multiple intervals.

Open a different kind of savings account
If you want to stay at your bank but don’t want to put your money into a CD, you have other options.

Banks also offer high-yield savings and money market accounts, which may be suitable alternatives to CDs.

  • A high-yield savings account may have an annual percentage yield (APY) comparable to a CD, with the added benefit of liquidity. However, these accounts can have account minimums as high, or higher, than CDs.
  • A money market account will have an APY somewhere between a high-yield savings account and traditional savings account, with an account minimum that can eclipse CDs as well. Like high-yield savings accounts, these funds also have the added benefit of liquidity, whereas CDs do not.

» MORE: CDs vs. savings accounts: Which is right for you?

Invest
If your goals and risk tolerance have changed, you also have the ability to invest. Choices include stocks, bonds, exchange-traded funds (ETFs), mutual funds and options.
  • Stocks can be quite volatile but have the ability to return profits significantly above CDs and high-yield savings accounts.
  • Bonds — either corporate or government — are traded in the public market. Corporate bonds will generally have returns higher than CDs and lower returns than stocks, but they are less volatile than stocks. Government bonds are comparable to CDs in both safety and returns.
  • ETFs are baskets of individual stocks bundled together and sold on a public market. These provide access to broad sectors and minimize individual stock risk.
  • Mutual funds are similar to ETFs, with the major exception that these funds are not traded on the public market. Mutual funds must be purchased from and sold through a custodian.
  • Options are a type of financial contract that allows investors to buy or sell securities at a preset price by a certain date. This is an extremely risky financial instrument that should only be used by those who are well-equipped to handle the potential downsides.

» MORE: Are CDs worth it? How much money should you put in a CD?

How to keep track of CD maturity dates

If you want to stay on top of your CD maturity date, be sure to review the documentation from your CD.

Regularly check your physical and digital mail as your maturity date approaches to ensure you see the notice from your bank.

FAQ

How long is a CD grace period?

CD grace periods are usually around one week.

Can you close a CD before it matures?

Most CDs will not allow you to withdraw funds, or close the account, prior to the maturity date without incurring some penalties or fees.

Do you pay tax on a matured CD?

Yes, CDs are taxed at your normal marginal tax rate.

What’s a good interest rate on a CD?

At the time of publishing, the average CD rate ranges from 0.18% on a one-month CD to 1.26% on a 60-month CD, according to the FDIC. Some online banks offer rates above 4%.

Bottom line

If your CD is nearing maturation, now is a good time to take stock of your financial goals and needs.

If your emergency fund has been depleted or you anticipate needing the money soon, withdrawing the money and putting it into an easily accessible savings account may be a good option.

If not, you should begin shopping around for CDs to see what your bank and others are offering. If your risk tolerance has grown, investing in the market could be your best bet.

What is most important is ensuring you are making the decision that is best for you, and one where you fully understand the potential ramifications.

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Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
  1. Federal Deposit Insurance Corporation, “ National Rates and Rate Caps .” Accessed. Feb. 26, 2023.
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