What to do when a CD matures
Key takeaways
- When a CD matures, you have about 7-10 days, called a grace period, to decide what to do with your money without incurring a penalty.
- Your options include renewing at the same bank, shopping for a better rate elsewhere, or withdrawing your money for other uses.
- If you don’t do anything, your CD will renew automatically at whatever rate the bank’s currently offering, which may not be competitive.
- If you miss the grace period but want to withdraw your money, you’ll likely trigger an early withdrawal penalty.
When your CD matures, you have a short amount of time — often 7 or 10 days — to decide what to do with your money.
Understanding your options when a CD matures can help you make the most of your money, whether you choose to reinvest in a new CD after searching for the best CD rates, explore other savings options or use the money for a planned purchase.
The grace period: Your window of opportunity
You get a brief grace period when your CD matures to withdraw your funds, add to your deposit or make other changes to your CD without incurring a penalty.
This grace period is typically 7-10 days, though it depends on the bank. Here are some examples of grace period policies at major banks:
| Bank | Grace period |
|---|---|
| Wells Fargo | 10 days |
| Bank of America | 1 day (7-27 day CDs), 7 days (28+ day CDs) |
| Chase Bank | 10 days |
| Ally Bank | 10 days |
| E*TRADE by Morgan Stanley | 7 days |
Your five options for when a CD matures
When a bank CD matures, you have several options:
1. Renew your existing CD at the same bank
You can let your CD automatically renew at the same bank for the same term or choose a different term that better aligns with your goals. Keep in mind that interest rates may have changed since you first opened your CD, and the new rate might not be competitive.
When this makes sense: If current rates at your bank are competitive and you’re satisfied with the term lengths available.
2. Shop for a new CD with better rates
Don’t feel obligated to stick with your current bank. Compare rates, terms, minimum deposits and early withdrawal penalties across multiple institutions. Consider different CD types like traditional CDs, no-penalty CDs or bump-rate CDs based on your needs.
When this makes sense: If your current bank’s renewal rate isn’t competitive and you’re open to moving your money to earn a higher return.
3. Move your money to other savings accounts
If you need more liquidity, consider moving your funds to a high-yield savings account or money market account. These options offer more flexibility for using your funds and competitive interest rates.
When this makes sense: If you need regular access to your money or want to avoid locking in funds for a set term.
4. Consider other investments
Depending on your risk tolerance and goals, you may want to consider investing your CD funds in stocks, bonds or mutual funds for potential higher returns. However, keep in mind that these investments come with greater risk than CDs.
When this makes sense: If you don’t need the money right away and are comfortable taking on more risk for the potential of higher returns.
5. Withdraw your funds for planned expenses
If you timed your CD maturity to coincide with a specific goal, like a down payment on a home or wedding expenses, you can simply withdraw the funds during the grace period and use them as intended.
When this makes sense: If you planned ahead and timed your CD maturity to cover a specific upcoming expense.
If you want to take advantage of higher rates on longer-term CDs but also want access to a portion of your money more frequently, consider building a CD ladder. By staggering the maturity dates of multiple CDs, you can enjoy both guaranteed yields and increased liquidity.
What to know if you miss your grace period
If you miss the grace period but need to access your money, expect to pay an early withdrawal penalty, which can be substantial.
Early withdrawal penalties for CDs vary widely.
- At Ally Bank, for example, the cost of an early exit from a one-year CD is 60 days’ worth of interest.
- At Popular Direct, the early-withdrawal penalty for a one-year CD is 270 days’ worth of interest.
If you have the option of leaving the money in the renewed CD, it may pay to do some math before withdrawing.
First, check your bank’s terms and calculate the cost of your early withdrawal penalty. Then use a CD calculator to see how much you’ll earn in the renewed CD at the rate the current bank is offering or how much you may earn at other, competitive banks.
Think about the trade-off of moving your funds to a higher-yielding account or other investment and decide if it’ll be worth paying the early withdrawal penalty.
Staying on top of CD maturity dates
When you open a CD, set up calendar alerts. One for about a month before your CD maturity date (so you have time to decide what to do) and one for the actual maturity date (so you can take action such as withdrawing the funds).
Some banks, such as Ally, allow you to provide the bank with instructions in advance about what to do when the CD matures.
Bottom line
CDs are a low-risk investment, and the guaranteed APY is an attractive benefit. But it’s important to keep track of your CD maturity date to have adequate time to explore your options and choose what makes the most sense to do with your money before your grace period expires.
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