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Don’t forget about your CDs

By Allison Ross · Bankrate.com
Friday, June 13, 2014
Posted: 9 am ET

© 2jenn/Shutterstock.comIt can be easy to lose track of money that you put into certificates of deposit.

Out of sight, out of mind, right? That money is stored away earning interest -- not to be touched -- for months or years.

But forgetting about that CD can mean lost interest income on your money.

Most CDs automatically roll over if a consumer doesn't give the bank instructions when the CD is about to mature.

Typically, that rollover goes to the prevailing CD rate at the time of the rollover -- which in the past six years has been to a lower rate, says Dan Geller, executive vice president of Market Rates Insight.

"Consumers should never let a CD roll over automatically," Geller says. "Always reevaluate the options for either a new term or a new type of CD based on the circumstances." See if there's a promotional rate on a CD that's better than the rollover rate or consider putting your money into a different product.

Other CDs don't have a CD rollover feature, meaning they stop earning interest when they mature.

Banks are required to notify consumers by mail when their CD is about to mature. Consumers who tend to lose track of mail or toss aside letters from their banks should make a note on their calendars or provide themselves some other reminder about CD maturity dates.

Losing track of entire CDs

In reporting another story, I was surprised to find out how often people lose track of entire CD accounts.

"Parents don't tell their kids about the CD they put in this one bank, or the parents themselves forget about the CD," says Walter Graham, chief of the Florida Bureau of Unclaimed Property. The parent dies and the bank can't reach the CD holder, so the CD and its interest are just left sitting.

Or, perhaps someone pulls the money out of a CD and the bank issues a check, but the check gets forgotten about and never cashed.

In the fiscal year 2013 in Florida alone, 1,403 CD interest payments or checks were collected by the state after going unclaimed for five years. That totaled more than $450,000 that year alone.

Escheat laws are set up so that states take control of unclaimed property, such as bank deposits, securities or CDs, that have been dormant a long time. The idea was to take the unclaimed property away from institutions that might try to hide them on their books and hope that no one noticed they were gone.

Consumers who have unclaimed property can still claim it, but -- in the case of CDs -- the money may not have been earning any interest as it sat there unclaimed.

For more on escheat laws, check out Bankrate's 2009 story on the subject.

And if you're in the market for a new CD, Bankrate's CD rates tool can help ensure you're getting the most yield.

Have you ever forgotten about a CD account, or let it roll over automatically?

Follow me on twitter: @allisonsross.

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