What to do when your CD matures: 3 options

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Certificates of deposit (CDs) are a low-risk savings option that offers guaranteed returns over a fixed term. When you buy a CD, you agree to leave your money deposited for a period ranging from a few months to several years. The bank or credit union pays you a higher interest rate in exchange. 

But what happens when your CD reaches the end of its term? With most CDs, you have a short period of time to decide what to do next. If you don’t withdraw your money, your bank may automatically renew your CD for the same term at the current interest rate. 

Here’s what you need to know about CD maturity and your options when it comes time to renew.

What happens when a CD matures? 

When your CD matures, you can withdraw your initial deposit and earned interest without facing any early withdrawal penalties. Your bank or credit union will notify you about the maturity date at least 30 days in advance. Reviewing this information and deciding what you want to do with your funds is important. 

When your CD matures, you have three main options: Rollover your CD into a new CD with different terms, renew your CD with the same terms, or withdraw your funds and close the CD. 

1. Renew your CD 

When you renew your CD, you reinvest the funds for another term with the same institution, typically at the current interest rate. For example, if you had a three-year CD, it would be renewed to another three-year CD. 

This can be the simplest option, especially if you're satisfied with your current bank and don't want to spend time shopping around. In most cases, you don’t need to do anything to renew your CD — your bank or credit union will do this for you. 

Consider renewing your CD if: 

• You're happy with the current interest rate and terms 
• You don't anticipate needing access to the funds for the duration of the new term 
• Your bank is offering a competitive renewal rate or loyalty bonus 

Remember that CD rates fluctuate over time based on the federal funds rate and your bank. Don't assume that renewing will always provide the same APY you previously had. That’s why it’s important to review the renewal terms. You may be able to negotiate for a better rate, especially if you've been a long-term customer. 

2. Roll over to a new CD 

Rolling over your CD means taking the funds from your matured CD and investing them into a new CD with a different term, interest rate, or even a different financial institution.

This can be a good choice if you don't need immediate access to the money and want to continue earning a guaranteed return. 

Consider rolling over to a new CD if: 

• Interest rates have risen, and you can get a higher yield 
• Your financial goals have changed, and different terms align better with your needs 
• You've found a more competitive offer from another bank or credit union 

Consider interest rates, minimum deposit requirements, term length, and early withdrawal penalties when comparing CDs. Once you've chosen a new CD, contact your current institution. 

If you plan on opening a new CD at the same bank, they may automatically roll over your funds into the new one. For example, if you had a 1-year CD maturing and wanted to put that money into a 5-year CD at the same bank. 

If you’re opening a new CD at a separate bank, you’ll have to withdraw and invest the funds. 

3. Withdraw the funds 

Withdrawing your funds is exactly what it sounds like — you take your initial deposit and accumulated interest out of the CD upon maturity. This allows you to use the money for other purposes or reinvest it elsewhere. 

Consider withdrawing your CD funds if: 

• You need the money now — like if you have a large purchase or emergency expense 
• Interest rates have dropped significantly, and you don't want to lock in a lower return 
• You simply want to use the money for another purpose 

If you decide to withdraw, it’s a good idea to have a clear plan for using or reinvesting the funds.

Factors to consider 

Here are some things to remember when deciding what to do with your maturing CD. 

• Your liquidity needs: How soon do you anticipate needing access to your funds? If you have upcoming expenses, you may want to prioritize liquidity over maximizing returns. 
• Financial goals: Are you saving for a specific target, like a down payment or college tuition? Aligning your CD's term with those deadlines ensures the money is available when needed. 
• Interest rate trends: Pay attention to the current rate environment and forecasts. If rates are rising, shorter-term CDs can allow you to capitalize on future increases. If rates are dropping, locking in a favorable rate with a longer term may be wise. 
• Automatic renewal policies: Understand your bank’s process for maturing CDs. Some may automatically renew unless you provide instructions otherwise.

How to find the best CD for you 

When shopping for a new CD, finding an option that aligns with your money goals and offers competitive rates is important. 

If you have a specific goal, like a down payment or vacation fund, look for a CD term that matches your target date. If you anticipate needing access to your funds sooner, a shorter CD may be better. 

Next, compare interest rates from multiple financial institutions. Online banks and credit unions often offer higher rates than traditional banks due to lower overhead costs.

Consider the minimum deposit requirements for each CD as well. Some institutions may require a higher initial deposit to unlock their best rates. Ensure you're comfortable with the amount you'll need to invest and that it aligns with your budget.

Finally, review the early withdrawal penalties for each CD. While choosing a term you can commit to is best, unexpected expenses can arise. Understanding the potential costs of withdrawing your funds early can help avoid costly surprises down the road.

Alternatives to traditional CDs 

In addition to traditional CDs, there are a few other options to consider: 

• Bump-up CDs: These CDs allow you to "bump up" to a higher interest rate if market rates rise during your term. Typically, you're allowed one rate increase, which you must request. 
• No-penalty CDs: These accounts combine the higher yields of a traditional CD with the ability to withdraw your money early without a penalty. The trade-off is that interest rates tend to be lower than regular CDs. 
• CD ladders: This strategy involves splitting your money across multiple CDs with staggered maturity dates. As each CD matures, you either withdraw the funds or reinvest into a new long-term CD at the end of your ladder. Laddering provides flexibility and the ability to take advantage of rate changes over time. 
• Step-up CDs: These CDs offer predetermined interest rate increases at set intervals, usually every 6-12 months. While initial rates may be modest, the idea of future bumps can make these a solid choice when interest rates are low. 

While CDs are a popular choice for fixed returns, they're not the only savings option. Here are a few alternatives to consider: 

• High-yield savings accounts: These accounts offer competitive interest rates with the added flexibility of easy access to your funds. They're a good choice for building an emergency fund or saving for near-term goals. 
• Money market accounts: Similar to high-yield savings accounts, money market accounts provide a blend of higher interest rates and liquidity. They may come with check-writing or debit card access, making them a convenient option for regular transactions.

How to close your CD 

If you decide to withdraw your funds and close your CD, here’s a step-by-step guide to do so: 

1. Avoid withdrawing funds before your CD matures to prevent incurring early withdrawal penalties. Your bank will notify you of the upcoming maturity date in advance. 
2. Contact your bank or credit union and inform them of your intention to close the CD upon maturity. You can typically do this in person, by phone, or online. 
3. Let your bank know how you'd like to receive your CD funds. Options may include transferring the money to another account, receiving a check, or taking a cash withdrawal. 
4. If you’re closing the CD in person, bring a valid form of identification, such as a driver's license or passport. If you're closing the account online, you may need to provide verification. 
5. Once your bank processes your request, confirm that the CD is officially closed. Request a written statement or confirmation for your records. 

Bottom line 

As your CD maturity approaches, take the time to review your finances and goals. Compare your current institution's rates and terms to other banks or credit unions. Online banks often have competitive rates due to lower overhead costs. 

If you decide to roll over or renew your CD, provide your bank with instructions before the maturity date to avoid an automatic renewal. If you plan to withdraw your funds, have a clear plan for how you'll use or reinvest the money productively.

Editorial disclosure: Opinions expressed are author's alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.