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Deciding What to Do When a CD Matures

thing to keep in mind
March 16 2018 • by Adam DeFrias • Money Management, Saving


If you have money socked away in a certificate of deposit – commonly referred to as a CD – there’s a good chance you’ve been awaiting the day it will mature. When a CD matures, you can access the money in it without incurring an early withdrawal penalty. But what exactly should you do with that money once it’s available? Believe it or not, you have several options – it’s just a matter of picking the one that best suits your financial needs.

Your bank or credit union is required to notify you shortly before your CD matures. That notification can come by email or postal mail, depending on which preferred communication method you chose when you first opened your CD. If you move to a new address, or change your email address, remember to update this information with your financial institution so you’ll be properly notified before your CD matures.

Once you know you have a CD maturing, it’s important to assess your current financial situation and goals before moving forward. Can you afford to tie up the funds in another CD? Do you have a pressing need for the money? Is there another financial product that could yield a better return? As you evaluate your financial objectives, keep in mind that your bank will usually only give you a limited amount of time – typically a week or two – to make a decision about what to do with the CD’s funds.

Once you’ve given thought to your financial needs and goals, you can determine the best way forward. Your options include:
 
  • Do nothing – If you can’t decide what to do with the money in your CD, your financial institution will make the decision for you. Usually the funds will be automatically rolled over into another CD with a similar length as the old one. But keep in mind that there’s no guarantee you’ll be earning the same interest rate as you did with your previous CD. To prevent your funds from being locked up in a new CD with an undesirable rate, you should make sure you know ahead of time exactly what the bank will do at maturity, if you don’t instruct them otherwise. If they plan to roll the money over to a new CD, be sure you know what interest rate you’ll receive. If the bank’s plan for your funds doesn’t meet your needs, you should choose another option and inform them of how you’d like to proceed.

  • Add funds to it – If you know you’d like to keep your money in a CD at your current financial institution, maturity is a great time (and in many cases, the only time) to add additional funds to it. If you’d like to boost your savings by adding money to an existing balance when your CD matures, you should inform your bank of your decision. You should also ensure that you know exactly what rate you’ll receive when you roll the funds over into a new CD term.

  • Shop around for a new CD – If you’d like to keep your money in a CD, it can be a good idea to see what CD products and specials are out there, rather than simply letting your bank roll over the money into a similar CD. You can ask your current bank about other CDs they may have available, or you can compare CD products across various financial institutions.

  • Withdraw and spend the money – If you have an immediate need for the funds - say a down payment on a house or a new car – now would be a great time to put those funds to use.

  • Look for a different investment opportunity – Depending on your current financial picture and risk tolerance, you may decide to withdraw the money and place it into a different savings vehicle, such as stocks or bonds, a retirement account, or an educational savings account. Just be sure to consult a tax advisor or financial professional before making any major investment decisions

  • Move the money elsewhere – If you’re not sure what to do with the funds in your CD account, you can always transfer the money to your checking or savings account. This will give you more time to decide how to handle the money, while still having easy access to it whenever you’ve made up your mind.
A CD account that’s reaching maturity is a great excuse to evaluate your saving strategy. By giving some thought to your financial goals, you can make an informed decision for your money once your CD matures. Best of luck!