How to Cash Out a Certificate of Deposit (CD)

Certificates of Deposit (CDs) offer a savings option that combines security with predictable returns. These accounts hold a fixed sum of money for a set period, known as the term, in exchange for a fixed interest rate. Understanding how to access these funds, whether at the term’s end or sooner, involves specific considerations regarding timing and required information. Navigating the withdrawal process efficiently ensures you can utilize your savings as intended.

Understanding CD Withdrawal Options

Cashing out a CD primarily occurs in two scenarios: at maturity or through an early withdrawal. When a CD reaches its maturity date, the full principal and accumulated interest become available. Financial institutions typically provide a grace period after maturity, often 7 to 10 days, during which you can withdraw funds without penalty. If no action is taken, the CD often automatically renews for a similar term at a new interest rate.

This typically results in an early withdrawal penalty. Penalties usually involve forfeiture of a specified amount of interest, such as 90 or 180 days, depending on the CD’s term and the financial institution’s policy. A shorter-term CD might incur a 90-day interest penalty, while a longer-term CD could involve 180 days or even a year’s worth of interest. In some cases, if insufficient interest has been earned, a portion of the principal may be affected.

Information Needed for Withdrawal

Before initiating a CD withdrawal, gathering specific information and documentation streamlines the process. You will need your CD account number. Valid personal identification, such as a driver’s license or passport, is required to verify your identity. Your Social Security Number (SSN) or Taxpayer Identification Number (TIN) is also necessary for tax reporting.

Details of the financial institution holding the CD, including its name and specific branch if applicable, are also required. If transferring funds, you will need the routing and account numbers of the linked checking or savings account. Having these details prepared in advance ensures a smooth and efficient withdrawal.

Initiating the CD Withdrawal

Once necessary information is assembled, you can initiate the CD withdrawal through various methods. For in-person withdrawal, visiting a bank branch allows direct interaction with a teller or customer service representative. Present your identification and CD account details, then complete and sign any required withdrawal forms. Many institutions offer immediate funds, often as cash or a cashier’s check.

Online platforms provide a convenient way to manage and withdraw CD funds. This involves logging into your financial institution’s secure online portal, navigating to the CD management section, and following prompts to initiate a withdrawal or transfer. Input your CD account number and specify the destination for funds, such as a linked external account.

If online withdrawal is not available, or for larger sums, contacting customer service by phone is another common method. A representative will confirm your identity and guide you through the withdrawal request, often requiring account detail confirmation. In some cases, a written request sent by mail may be an option, requiring you to complete, sign, and mail a form to the designated address.

Receiving Your Funds and Post-Withdrawal Steps

After initiating your CD withdrawal, funds are disbursed through common methods. Direct transfer to a linked checking or savings account is a frequent option, with funds arriving within one to three business days. Alternatively, you may receive a cashier’s check or a physical check mailed to your address. The specific disbursement method depends on your financial institution’s policies and the nature of your withdrawal.

Once the withdrawal is complete, the CD account is typically closed if the entire balance is taken out. Any interest earned on the CD is considered taxable income and must be reported to the IRS, even if reinvested. Financial institutions generally issue a Form 1099-INT for interest earnings of $10 or more. This interest is subject to federal income tax and, in some cases, state and local taxes, in the year earned. The principal amount invested is not taxed upon withdrawal, only the interest generated.