When you open a certificate of deposit (CD), you agree to leave your money on deposit for a specific period of time in exchange for a stated interest rate. But eventually that term comes to an end.
That date is known as the CD maturity date—and what you do next can matter.
Many people simply allow a CD to renew automatically. Before doing that, it can be worth taking a few minutes to understand what happens at maturity and review the choices available to you.
When a CD matures, the term you originally agreed to has ended.
At that point, your original deposit plus the interest you've earned generally becomes available according to the terms of the account.
Your bank or credit union will typically provide information about the maturity date and what will happen if you don't take any action.
That's important because doing nothing may itself be a decision.
Many CDs provide a grace period after maturity.
During this window, you may be able to withdraw your money, add or remove funds, or choose a different CD without paying the early-withdrawal penalty that might have applied during the original term.
The length of the grace period varies by financial institution and account, so it's important to check the terms of your particular CD.
Once the grace period ends, the CD may automatically renew if you haven't provided other instructions.
If your CD has an automatic-renewal provision and you take no action, the bank may roll your balance into a new CD.
But here's something worth paying attention to:
The new CD may not have the same interest rate as the CD that just matured.
The renewal will generally be based on the rates and terms the institution is offering at that time. Your new term may also begin immediately after the grace period ends.
That means it's worth checking the new rate rather than assuming you're receiving the same return you had before.
Depending on your financial situation and the terms of the account, you may have several choices.
You might decide to:
There isn't one answer that's appropriate for everyone. Your liquidity needs, time horizon, interest-rate environment, taxes, and financial goals can all play a role.
Automatic renewal can certainly be convenient, but convenience doesn't necessarily mean you shouldn't review your options first.
Before allowing a CD to renew, consider checking:
What rate is being offered?
How long will your money be committed?
Will you need access to the money during the new term?
Are there other options offering a rate or features worth considering?
A few minutes of comparison can help you make a more informed decision before committing your money for another term.
For money intended for longer-term savings or retirement, some people also compare CDs with fixed annuities.
Both can offer predictable interest rates for specified periods, but they are different financial products.
A CD is a bank or credit-union deposit product. A fixed annuity is an insurance contract issued by a life insurance company.
CDs held at FDIC-insured banks may qualify for FDIC insurance within applicable limits. Fixed annuities are not FDIC insured. Their contractual guarantees are backed by the claims-paying ability of the issuing insurance company.
They can also differ in tax treatment, liquidity provisions, surrender charges, available terms, and what happens at the end of the guaranteed period.
Understanding those differences is important before making a decision.
A maturing CD gives you something valuable: an opportunity to reconsider where your money goes next.
Rather than allowing an account to renew automatically without reviewing it, take a moment to look at the new rate, the new term, your need for access to the money, and the alternatives available to you.
Your CD worked for a specific period of time. When that period ends, it's worth asking whether the next step still fits your goals.
Wondering how your current CD rate compares with a fixed annuity rate?
Use CDA's Compare Your CD Rate tool to explore how different rates could affect your savings over the same period.