When your CD matures: what to do
Key points about mature CDs:
Depending on your bank’s policy, you may only have seven to ten days to withdraw without penalty from a CD once it expires.
If you do not withdraw, your bank can automatically renew your CD for the same duration but at the bank’s prevailing rate. If you had a long term CD that expired recently, chances are the new rate will be lower.
By the time a CD’s term ends, or “matures,” you usually have less than two weeks to decide what to do next or let your bank decide for you. This is your opportunity to transfer your money, either to a new CD or elsewhere.
What is the grace period of a mature CD?
A grace period is a short window of time, usually one to two weeks, during which you can withdraw the money from your CD without paying an early withdrawal penalty. A grace period begins the day after a CD’s expiration date or the last day a CD is opened.
If you don’t withdraw during this time, a bank will usually automatically renew a CD at the same term as originally. For example, a five-year CD expires and renews itself or turns into a new five-year CD. The rate of the new CD will probably not be the same as that of the original.
Your 3 choices during the grace period
1. Withdraw your CD funds and transfer them to another account.
This gives you the option of putting that money into a more accessible vehicle, such as a checking or savings account, or investing it. If you’ve used a CD to pursue short-term savings goals, like buying a house or a car, you’ll probably want more access now. If, on the other hand, you want a better return and are willing to accept more risk, one option is to transfer your money to a brokerage account. (See more details on short term investments.)
2. Withdraw your funds and deposit them on another CD.
You might decide that your CD funds don’t need more risk or affordability. In this case, opening another CD may be the right choice. Compare multiple rates between banks, especially online banks. You may also want another type of CD (see nine types of CDs).
3. Let your bank renew your CD.
This is the most convenient option, but not necessarily the best. Letting your bank renew your CD may mean ending up with a lower (or higher) rate because your bank will likely give you the same rate they offer for new CDs with that term. Compare several CD conditions and rates in your bank and elsewhere before choosing to replace your CD with a new one. If you choose to renew, consider taking advantage of the grace period by adding more funds to your CD. This may require calling the bank or visiting a branch, in the case of physical banks.
Remember the expiration date of your CD
Unlike other bank accounts, CDs penalize you for withdrawals at any time except during the grace period. The early withdrawal penalty tends to represent several months of interest, even a year (see a list of more than a dozen bank penalties).
Banks typically send a notification, say three to four weeks before a CD’s expiration date, of an impending renewal. If you lose or forget this reminder, you may miss the grace period, and if you don’t want to pay a penalty, you will have to wait until the new CD term expires before you get your money back.
The only exception is a CD without penalty. These don’t have the best rates, but they can give you the peace of mind that you can withdraw free of charge anytime after the first few days of a CD. (See our best CD rates without penalty for more details.)
Grace periods in some banks
The grace period for a CD may vary by bank and credit union; here are several:
Be ready for the end of your CD
CDs are the only bank account where knowing a day, the due date, is vital in planning the future of your money in that account. Mark the day and the grace period on your calendar and set a reminder one month before to be ready.