Eventually all CD’s mature. So what should you do now? Generally you have less than two weeks to decide what to do next or let your bank decide for you. This is your opportunity to change up your money, either in a new CD or elsewhere.
Knowing what to do when your CD matures is important so be sure to keep reading below!
Grace Period
After your CD account matures you now enter the phase known as the grace period. A grace period is a short window of time, generally one to two weeks, when you can withdraw the money in your CD without paying an early withdrawal penalty.
If you don’t withdraw during this period, a bank will typically renew a CD automatically at the same term it originally had.
What to do During a Grace Period
You generally have 3 main choices once you enter the grace period.
- Withdraw your CD funds and transfer them into a different account.
- This allows you to either put that money into a more accessible vehicle, such as a checking or savings account, or invest it.
- Short-term savings goals, such as buying a home or car, you’ll likely want more access now
- Long-term savings goals, you want a better return and are willing to accept more risk, then moving money into a brokerage account is a smarter choice
- Withdraw your funds and deposit them into a different CD.
- If you like the way CD accounts work and are simply looking for a better rate or features then switching to a different CD account is the right move for you.
- Renew Your CD
- This is the most convenient option but not necessarily the best. Letting your bank renew your CD might mean ending up with a lower/higher rate because your bank will likely give you the same rate it offers for new CDs with that term.
Remember the Grace Period
Unlike other bank accounts, CDs penalize you for withdrawing at any time except during the grace period. Banks generally send a notification three to four weeks before a CD’s maturity date about an impending renewal.
The one exception is a no-penalty CD. These don’t have the best rates, but they allow you to withdraw at any point cost-free after a CD’s first few days.
Conclusion
CD accounts can provide a wide range of features and account types. Understanding what you need in terms of financial features is incredibly important when it comes to knowing what kind of checking account you would most benefit your financial goals.
Hopefully after reading this you understand what to do when your CD account matures! Be sure to do proper research and start saving today!
Additionally, If you are interested be sure to check out our list of bank bonuses and CD rates!