What to Do When Your Certificate of Deposit Matures

A Certificate of Deposit (CD) is a type of savings account offered by banks and credit unions that holds a fixed amount of money for a specific period, known as its term. In exchange for keeping funds deposited for this set duration, the issuing institution pays a fixed interest rate. A CD is distinguished by its fixed withdrawal date, referred to as the maturity date. This date marks the end of the agreed-upon term, at which point the principal and any accrued interest become accessible without penalty.

Understanding CD Maturity and Grace Periods

The maturity date of a Certificate of Deposit signifies the precise moment when the fixed term concludes, making your initial deposit and all earned interest available. Until this date, funds are generally locked in, and early withdrawals typically incur penalties.

Immediately following the maturity date, a brief window known as the grace period begins. This period, commonly lasting between 7 to 10 calendar days, provides an opportunity to decide the next step for your funds without incurring penalties. The exact duration of the grace period can vary by institution and even by the CD’s term length.

Your Options at Maturity

At the maturity of your Certificate of Deposit and during the grace period, you have several choices for your funds. Financial institutions generally provide notification before your CD matures, outlining these available options.

One common choice is reinvesting, often referred to as rolling over, where you place the principal and accrued interest into a new CD. This new CD will have a new term, which can be the same or different from your original CD, and will carry the prevailing interest rate offered by the institution at the time of renewal.

Alternatively, you can choose to withdraw all your funds from the CD. Institutions offer various methods for withdrawal, such as transferring the money to a linked checking or savings account, or receiving a check for the full amount. When you choose this path, the CD account is typically closed.

Some financial institutions may also offer the flexibility of a partial withdrawal, allowing you to take out a portion of the funds while reinvesting the remaining balance into a new CD. This option can be beneficial if you need immediate access to some of your money but wish to keep the rest invested to continue earning interest. The terms for such partial withdrawals and subsequent reinvestment will depend on the specific policies of your financial institution.

Taking Action After Maturity

Communicating your decision to the financial institution is a necessary step. You can typically inform them of your chosen option through various channels, including online banking portals, a phone call to customer service, or by visiting a local branch. It is advisable to review any notices sent by your bank, as they often detail the specific methods for providing instructions.

If no action is taken during the grace period, most Certificates of Deposit are designed to automatically renew. This means the principal and interest will be rolled over into a new CD, usually with the same or a comparable term length as the original CD. The interest rate for this automatically renewed CD will be the current rate offered by the institution for that specific term at the time of renewal, which may differ from your previous rate. This new CD will then have its own maturity date and grace period.

For those choosing to reinvest, the process involves notifying the bank of your intent to renew and, if desired, selecting a new term length or adding additional funds. If you opt for a full withdrawal, you will communicate this decision and specify how you wish to receive the funds, such as a transfer to a linked account or a physical check.