How Long Does It Take to Cash Out a CD?

A Certificate of Deposit (CD) is a savings account where a fixed sum of money is held for a set period, such as six months, one year, or five years. In exchange for committing these funds, the issuing financial institution pays interest, often at a rate higher than a standard savings account. CDs are considered a secure savings option, typically insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) for banks or the National Credit Union Administration (NCUA) for credit unions. The duration it takes to access funds from a CD can vary significantly, depending on whether the account is closed at its scheduled maturity date or earlier.

Cashing Out at Maturity

As a CD approaches maturity, the financial institution typically sends a notification to the account holder. This notice, sent about 14 days before maturity, outlines options and the grace period. Common choices include renewing the CD for a new term, rolling the funds into a different CD, or cashing out the principal and earned interest. Many banks will automatically renew a CD for a similar term at current rates if no instructions are provided by the account holder.

To cash out at maturity, the account holder must contact the bank (in person, by phone, or online). This must occur within the grace period, which usually begins the day after maturity. This grace period, often lasting between 7 and 10 days, allows for penalty-free withdrawals or changes to the CD. If the correct procedures are followed during this window, the funds become available relatively quickly, often within the grace period or a few business days.

Cashing Out Before Maturity

Withdrawing funds from a CD before maturity is an early withdrawal, involving specific steps and financial implications. Account holders must explicitly request this from their financial institution, potentially involving forms or direct communication. This process is distinct from cashing out at maturity, as it bypasses the agreed-upon term of the CD.

Early withdrawals almost always incur penalties, which are outlined in the CD agreement at the time of opening. These penalties are generally calculated as a forfeiture of a certain number of months of interest, rather than a fixed fee. For instance, a short-term CD might incur a penalty of three months’ interest, while a longer-term CD, such as one for five years, could involve forfeiting up to 12 months of interest. In situations where the accrued interest is less than the penalty amount, the difference may be deducted directly from the original principal, potentially reducing the initial investment.

While processing an early withdrawal request might be prompt once initiated, the overall timeline can be extended due to the necessary calculation and application of these penalties. Federal law mandates a minimum penalty of seven days’ interest if a withdrawal occurs within the first six days after deposit, though banks can impose higher penalties. In rare circumstances, such as the death, disability, or legal incompetence of the account holder, some financial institutions may waive these early withdrawal penalties.

Receiving Your Funds

Once a CD cash-out is processed, whether at maturity or early, the final step is fund disbursement. The method of receiving funds influences the overall timeline for accessibility. Common methods include direct deposit (ACH transfer) to a linked checking or savings account, receiving a check by mail, or an internal transfer to another account at the same bank.

Internal transfers within the same financial institution are quickest, with funds becoming available almost immediately. ACH transfers typically take 1 to 3 business days, though same-day options may be available for an additional fee. Factors like initiation time, bank cut-off times, and whether the transaction occurs on a weekend or holiday can affect ACH transfer timing. Receiving funds via a mailed check generally takes longer, as it depends on postal delivery times, which can range from a few business days to over a week, followed by the time it takes for the check to clear once deposited. For larger withdrawal amounts, financial institutions may require additional verification, potentially extending the time until funds are fully accessible.