When a certificate of deposit (CD) reaches maturity, you’ll be able to access the deposit in the account along with the interest it earned. You can choose to roll over your CD into a new one, switch to a different bank’s CD products, or deposit the money somewhere else.
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What Does CD Maturity Mean?
When you invest in a certificate of deposit (CD), you leave a deposit in an account for a period of time to accrue interest. During that time, which can be anywhere from six months to five years, you won’t be able to access the money in that account.
Your CD reaches “maturity” when the fixed period of time elapses. The disclosure statement you receive when signing up for a CD should clearly state on what day your CD will mature, known as the maturity date.
On the CD’s maturity date, you’ll receive the maturity value of the CD. This includes both the initial funds you invested along with any interest the CD earned during its term. The longer the term of the CD, the higher the interest rate will be.
A CD’s maturity value is calculated using the deposit amount, the interest rate of the CD, the length of the term and how the interest is compounded. When interest is compounded, the amount of interest is added to the CD’s balance, and then that money begins to earn interest, too.
Let’s say you deposit $10,000 in a three-year CD with a 2% interest rate that compounds daily. When your CD reaches maturity, you’ll have earned $618.35 in interest, making the maturity value of your CD $10,618.35.
What Can You Do When Your CD Matures?
When your CD reaches maturity, you have a few options in terms of what to do with the money. If you need that money now, you can withdraw the CD’s value and return it to your checking account. But if you want to keep that money in savings, and continue to grow it by earning interest, there are a few things you can do.
Roll Over Your CD
The bank or other financial institution that holds your CD will likely offer to roll your old CD over into a new one. Some banks will automatically roll over your CD at the end of its term unless you tell them not to.
You should receive notice before the maturity date letting you know when your CD ends and whether it will automatically be rolled over. When you get this notice, be sure to compare the interest rate on your current CD to the new CD’s interest rate.
The new rate is not guaranteed to be the same as your current one. Your current CD might be a much higher promotional rate, and once you renew the CD, your rate will drop. If you’re not satisfied with the rate on this new CD, you should be prepareds to withdraw the funds and put them somewhere else.
Choose a Different CD
If you want to keep your CD at the same bank, you might look into putting your money in a different type of CD. You can get a better interest rate with a longer maturity term if you can afford to keep your money locked up for longer.
There are also special types of CDs that earn interest differently. A “step-up” CD, also known as a “multi-step” or “bonus-rate” CD, has an interest rate that can increase during the CD’s term.
There are also “callable” CDs, which tend to offer better interest rates. The drawback of these CDs is that the bank can choose to end your agreement before the CD matures and return the deposit with whatever interest it earned up to that time.
Switch to a Different Bank
The weeks leading up to your CD’s maturity date are a good time to research what the current market for CDs looks like. Federal interest rate hikes in 2023 have boosted the rates on many CDs, offering much better returns than in recent years.
The best rates will usually come from online banks that offer high-yield CDs with low minimum deposits. Just make sure whichever bank you choose is FDIC-insured, so you can feel confident that your deposit is secure.
Deposit Your Money Somewhere Else
You might also move your money out of CDs entirely and deposit the funds in a different savings vehicle. There are several alternatives to CDs worth considering, and which one is right for you depends on your savings goals.
Those who want to have their savings more readily available might prefer a high-yield savings account or money market account. These accounts generate greater returns than a traditional checking or savings account, but you can access your funds at any time.
For guaranteed returns on a protected principal deposit, you may consider purchasing bonds. A bond can be issued by the government or by a private business, and government bonds are considered some of the most reliable long-term investments.
If you want to get greater returns on your savings than a CD or bonds can offer, you may want to look at investing in the equity market. When you’re saving money for a long-term goal such as retirement, investing is a good idea because over time, your savings will weather the ups and downs of the market and come out ahead.
No matter what you choose to do with your CD, you’ll have some time to decide once it matures. Most banks offer a grace period when you can decide what to do with your money. The grace period typically lasts one or two weeks.
If you don’t decide before the grace period ends, the bank will decide for you what will happen to your CD. They could automatically roll it over into a new CD or transfer it back to you.
When you withdraw the CD funds, you should receive the money via a check in the mail or by direct deposit if you also have a checking or savings account with the same bank.
How Long Should My Maturity Be When I Buy a CD?
Which CD maturity is right for you depends on your personal finance priorities and goals. Are you saving for a long-term goal and want to get the most interest possible? Or do you anticipate needing the money soon and want to earn a bit of interest in the meantime?
The tradeoff with CD maturity is that the longer your CD’s term is, the higher the interest rate will be and the more interest you’ll earn over time. To get the best rates, you’ll need to put your deposit away and not touch it for a long time.
For this reason, shorter CDs are better if you’re saving for a short term goal, like a vacation or a splurge purchase. If you’re putting those savings away for a long term goal, such as a down payment on a house, then it’s worth it to buy a CD with a long term and a higher interest rate.
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5 Cited Research Articles
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- Consumer Financial Protection Bureau. (2020, August 27). What Is a Certificate of Deposit (CD) Rollover or Renewal? Retrieved from https://www.consumerfinance.gov/ask-cfpb/what-is-a-certificate-of-deposit-cd-rollover-or-renewal-en-923/
- Consumer Financial Protection Bureau. (2017, January 4). The Interest Rate Offered for CDs (Certificates of Deposit) Is Low. Is There Anything I Can Do About That? Retrieved from https://www.consumerfinance.gov/ask-cfpb/the-interest-rate-offered-for-cds-certificates-of-deposit-is-low-is-there-anything-i-can-do-about-that-en-921/
- Gravier, E. (2020, November 24). Here’s What You Can Do With Your Money When Your CD Term Ends. Retrieved from https://www.cnbc.com/select/what-to-do-when-cd-matures/
- Office of the Comptroller of the Currency. (2021, April). My Certificate of Deposit (CD) Has Matured. How and When Will I Receive My Funds? Retrieved from https://www.helpwithmybank.gov/help-topics/bank-accounts/certificates-of-deposit/cd-mature-funds.html
- U.S. Securities and Exchange Commission. (n.d.). Certificates of Deposit (CDs). Retrieved from https://www.investor.gov/introduction-investing/investing-basics/investment-products/certificates-deposit-cds