What Should You Do When Your CD Matures?

A Certificate of Deposit (CD) is a savings account holding a fixed amount of money for a fixed period, paying interest. When a CD matures, the term ends, making the principal and earned interest available. This is a key moment to re-evaluate how these funds can best serve your financial objectives.

Automatic Rollover and Grace Periods

When a CD matures, financial institutions typically initiate an automatic rollover if no instructions are provided. This reinvests the principal and accrued interest into a new CD, usually with a similar term length, at the prevailing interest rate. While convenient, the new rate might be higher or lower than the original.

Before an automatic rollover, banks generally offer a grace period. This window, often 7 to 10 days after maturity, allows you to withdraw funds or make changes without penalty. During this time, you can renew the CD, transfer funds, or withdraw them. Missing this grace period can lock your funds into a new CD term, making them inaccessible without early withdrawal penalties.

Reinvesting in a New CD

Reinvesting funds into a new Certificate of Deposit is a common action upon CD maturity. This strategy suits those prioritizing capital preservation and predictable returns. When choosing a new CD, consider various term lengths, from a few months to several years; longer terms generally offer higher interest rates.

Beyond traditional fixed-rate CDs, other types exist. Bump-up CDs allow for an interest rate increase if market rates rise, while liquid or no-penalty CDs offer early withdrawal flexibility without penalty, though often with lower rates. A CD ladder, where investments are staggered across multiple CDs with different maturity dates, can provide regular access to funds while benefiting from higher rates of longer-term CDs. Reinvesting ensures your money continues to grow within a federally insured environment, typically up to $250,000 per depositor, per institution.

Using Your Funds Elsewhere

Alternatively, you can withdraw matured CD funds and allocate them to other financial instruments or goals. A high-yield savings account is a common destination, offering more liquidity than a CD with competitive, though variable, interest rates. This option provides easy access to your money, useful for emergency funds or short-term spending goals.

Funds can also be directed towards debt repayment, particularly high-interest consumer debt, as paying down debt offers a guaranteed return equal to the interest rate avoided. For those with a higher risk tolerance and longer investment horizon, investing in stocks, bonds, or mutual funds could provide potentially higher returns, though these carry market risk. Contributions to retirement accounts, such as IRAs, also present a tax-advantaged way to utilize the funds for long-term growth.

Making an Informed Decision

Deciding what to do with a matured CD requires evaluating your current financial situation and future objectives. Consider the prevailing interest rate environment: in a rising rate environment, shorter-term CDs or high-yield savings accounts might be more appealing, allowing you to capture future rate increases. Conversely, if rates are expected to fall, locking in a higher rate with a longer-term CD could be advantageous.

Your personal financial goals should guide your decision. Assess your liquidity needs, determining if you require immediate access to funds or if they can remain invested longer. Consider your risk tolerance; CDs offer stability and federal insurance, while other investments carry more risk but also higher potential returns. Ultimately, integrating the matured CD funds into your overall financial strategy, whether for continued savings, debt reduction, or diversification, ensures your money continues to work effectively for you.