What to Do When a CD Reaches Maturity?

A Certificate of Deposit (CD) is a savings account that holds a fixed amount of money for a fixed period, earning a fixed interest rate. When a CD reaches its maturity date, understanding the process and available choices is essential for informed financial decisions.

What Happens When Your CD Matures

When a CD reaches its maturity date, the principal and earned interest become available. Many financial institutions automatically renew the CD into a new one of the same term length at the current interest rate. This automatic rollover ensures investment continuity unless the account holder takes action.

Most banks provide a grace period after maturity, usually 7 to 10 days. During this window, the account holder can decide how to proceed with their funds without incurring penalties. This allows time to consider options before automatic reinvestment or transfer.

Financial institutions notify customers in advance of their CD’s maturity date. These notifications arrive by mail or email several weeks before maturity. This allows individuals to review their financial situation and plan their next steps.

Your Choices for Matured CD Funds

Upon a CD’s maturity, account holders have three options for their funds. One choice is to renew the CD, either with the same or a different financial institution. This decision often depends on current interest rate environments; if rates have risen, renewing at a higher rate can increase earnings. Account holders can also choose a different term length, aligning the new maturity date with future financial goals or liquidity needs.

Another option is to withdraw the funds. This choice suits individuals needing immediate access for expenses, debt repayment, or other liquidity requirements. The principal and accrued interest become accessible and can be transferred to a checking or savings account, or withdrawn as cash.

Funds from a matured CD can also be reinvested into other financial products. This might include moving the money to a high-yield savings account, a money market account, or a brokerage account for investment in stocks, bonds, or mutual funds. The decision to reinvest elsewhere often aligns with broader financial objectives, such as saving for a specific goal, diversifying investments, or seeking potentially higher returns, albeit with varying levels of risk.

Steps to Take After Maturity

After deciding how to handle matured CD funds, the next step involves communicating this choice to the financial institution. Most banks offer several convenient methods for this, including online banking portals, phone calls to customer service, or in-person visits to a branch. Having the CD account number and personal identification ready will streamline the process.

If renewing the CD, specify the desired new term length, if different from the original, and confirm the current interest rate. For an automatic rollover, no action is required unless a different term or principal amount is desired. Stating the renewal terms ensures the investment continues as intended.

For those opting to withdraw funds, instructions can be given to transfer the money directly to a linked checking or savings account. Alternatively, a check can be requested, or arrangements can be made for an in-person cash withdrawal at a branch. Confirming the transfer details or pick-up arrangements is important to ensure timely access to the funds.

When choosing to reinvest funds elsewhere, the financial institution can facilitate a transfer of the matured CD principal and interest to another account, either within the same bank or to an external institution. This might involve setting up an Automated Clearing House (ACH) transfer or, for larger sums, a wire transfer. Providing accurate routing and account numbers for the destination account is essential for a successful transfer.