What happens when a CD matures?

A certificate of deposit (CD) is a type of savings account that holds your money for a fixed term and pays a set interest rate in return for leaving it untouched. With that being said, saving money in one is a secure and smart way to grow your savings.

But CDs don’t lock your money away forever—and that’s a good thing. When your CD reaches its maturity date, you’ll need to decide what to do next with the money you’ve invested.

Do CDs automatically renew? In many cases, yes. However, you generally have to choose what happens when a CD matures. You can:

1. Renew the CD with no changes.

2. Renew the CD but change the amount of money invested as well as its term length.

3. Close the CD and withdraw the money.

What are you saving for? Is it for something soon, like a vacation or a new car? If that’s the case, you might want to renew the CD for a shorter term or close it. If your goal is further in the future, like retirement or your child’s college fund, renewing for a longer term could help you earn more interest. Managing your savings strategy is simple since you can change your maturity instructions for your 360 CD at any time before the term ends.

CDs are best for depositing money you won’t need immediately, since most have early withdrawal penalties. If there’s a chance you’ll need the money before the CD matures, consider a shorter-term CD or a savings account.

Tip: Build a CD ladder for more flexibility. If you’re attracted to the higher interest rates CDs offer but prefer being able to access some of your money periodically, a CD ladder strategy might help.

To build a ladder, you split your money among two or more CDs with different maturity dates. For example, you could open 12-month, 24-month and 36-month CDs at the same time. When each CD matures, you can withdraw the money or renew the CD to keep it earning at higher interest rates.

CDs typically offer fixed interest rates, unlike most traditional savings, checking and money market accounts that offer variable rates. In exchange for this fixed rate, you agree to leave your money in the CD for the full term.

Alternatively, savings accounts allow you to withdraw money at any time, but their interest rates aren’t guaranteed to stay the same. CDs may offer a higher interest rate than other types of accounts. Consider comparing rates across different types of savings products, and keep in mind that different CD terms typically have different rates.

It’s also worth comparing CDs to other investment options like stocks or bonds. With CDs you know exactly how much interest you’ll earn, and your money is protected up to Federal Deposit Insurance Corporation (FDIC) limits.

Investments like stocks have the potential for higher returns but a greater risk of losing money. Spreading your money across different types of savings and investments is often a smart move. But the right mix depends on how much risk you’re comfortable with and your timeline for needing the money.

With these considerations in mind, you can decide what happens when a CD matures. Be sure to check your bank’s specific policies.

If you do nothing when your CD matures, some banks automatically renew it after a brief window, called a grace period. During this time, you can make changes or withdraw your money without penalty. The new CD may have the same term as the old one. So, if your CD was for 12 months, the new one may also be for a 12-month term.

The interest rate on the new CD typically reflects the bank’s current rate for that term on the day the CD matures. This rate might be higher or lower than the rate you had before.

Remember, the new interest rate won’t be locked in until the maturity date of the CD you had previously, even if you give instructions before that time. Your new rate will reflect the rate of your selected CD term on your CD maturity date.

You can choose to renew your CD but also make changes to it by updating the amount invested and/or length of your term. For example, adding more money to the CD helps it grow faster. Or you could select a different term that offers a higher interest rate.

Many banks let you update your CD instructions shortly before the maturity date, typically within a set window. You might also be able to make changes during the previously mentioned grace period that takes place after the CD matures. If you give instructions in advance, the bank will usually apply them on the maturity date and the standard grace period may not apply.

Most banks let you add or withdraw funds for a CD by transferring money from an account at the same bank or from a linked account at another bank. Some also support checks or wire transfers, but these may require contacting the bank to arrange them.

What happens when a CD matures and you need the money? You can simply choose to close it and withdraw all of the funds.

To cash out a CD at maturity, you’ll need to notify the bank that you want to close the account and specify how you’d like to receive the funds. Most banks offer several withdrawal options, such as transferring the balance to another eligible account or a linked external account. Many also allow you to request a check or wire transfer. The Capital One mobile app makes it seamless to adjust your maturity plan, so you can decide exactly how you want your money handled once the CD term is up.

Can you close a CD early? Technically, yes. But if you close a CD before its maturity date, you’ll probably pay a CD early withdrawal penalty. So, it’s best to wait until the CD matures to close it unless you really need the money sooner.

Whether your savings goals are short-term or long-term, a CD can be a great option for guaranteed and predictable returns.

A certificate of deposit (CD) doesn’t keep your money locked away forever. It reaches a maturity date, at which point you’ll need to decide what happens next.

• You’ll typically get a short decision window, called a grace period, after maturity to decide what to do next. 

• You generally have three options at maturity: renew as-is, adjust the amount or term, or close the CD and move your money elsewhere. 

• Auto-renewal is common with CDs. If you don’t take action, your CD may roll over—often at the current market rate and for the same term.