What Happens When a Certificate of Deposit (CD) Matures?

A CD, or certificate of deposit, is a type of savings account that lets you earn a set interest rate for a specific period or “term.” CD interest rates are usually higher than a typical savings account, but there may be penalties if you withdraw the money before the CD matures (reaches the end of the agreed-upon term).

What happens when a CD matures?

A CD maturity date is the last day of your certificate of deposit’s term. At the maturity date, you can access your funds without penalty, whether you choose to withdraw your money, renew the CD for another term or transfer the funds to a different account. Depending on your agreement, the bank or credit union may automatically renew or roll over your CD, including the interest earned so far, or the CD may stop earning interest at maturity.

How to know when a CD matures

Your bank or credit union will send a notice when your CD's maturity date is approaching. You can also look for the maturity date in your account documents or mobile banking app.

What to do before a CD matures

You may find it helpful to take these steps before your CD matures.

• Check your terms: Look at your CD’s original term to double-check the maturity date, interest rate and any conditions for withdrawal or renewal.
• Consider your current finances: Do you need to withdraw the funds for an urgent expense or would reinvesting them to grow more for future use be a better choice?
• Explore your options: Familiarize yourself with your options so you can act quickly when your CD matures.
• Rate shop: Check the interest rates for other CDs, as well as other types of accounts, like savings accounts, where you might put your money next. Remember that rates can vary between banks or credit unions.

Understanding CD grace periods

Most CDs have grace periods, which is the time you have to make changes to your CD after it matures without incurring penalties. A grace period typically lasts 7 to 10 days after a CD matures (Citi CDs have a grace period of up to 7 calendar days).

What happens if you miss a CD grace period?

Different banks and credit unions manage CD grace periods differently. If you don't take action during the grace period:

• Your CD may automatically renew at a new interest rate, which could be higher or lower than your original interest rate
• The bank or credit union may hold your funds in the account with or without paying interest
• The bank or credit union may send you a check for the account balance

If your CD automatically renews, you may need to pay an early withdrawal penalty to access your funds before the end of the new term.

Options after a CD matures

During the grace period, you can renew your CD, move the money to a different CD, withdraw your funds or invest your money in a different way. Let’s take a closer look at each option.

Renew your CD

In many cases, the bank or credit union will automatically renew the CD for the same term at the rates in effect on the CD renewal date. If you don’t need the money immediately and are happy with the interest rate and term, you might let the CD renew or even choose to add more funds.

Always confirm the rate and term before going forward with this option. CDs may renew with different rates, terms or conditions. Your bank or credit union may automatically renew the CD for a different type. For example, a no penalty CD might renew for a fixed rate CD.

Move the money to a different CD

You may want to shop around for a new CD that better suits your needs. Different CDs may have higher interest rates or offer rates that gradually increase, like a step up CD. Others, such as no penalty CDs, allow you to invest your money without worrying about penalties for early withdrawals. However, usually you have to withdraw the entire balance after the first few days of funding have passed. Depending on your financial goals, you may also consider a longer or shorter term CD. For example, if you know you’ll want to access the funds to use them for a down payment when purchasing a home in 3 to 5 years, it may not make sense to move the money to a 10-year CD.

Create a CD ladder

You could also choose to spread the funds across a new CD ladder. To create a CD ladder, you open multiple CDs with staggered maturity dates. For example, if you withdraw $8,000 at your maturity date, you could reinvest that money across 4 new CDs that mature in 6 months, 1 year, 18 months and 2 years. A CD ladder allows you predictable access to your money, while allowing you to take advantage of potentially higher interest rates on longer-term CDs to maximize your earnings.

Withdraw your funds

If you need access to your money right away, you can also withdraw some or all of the funds before the grace period ends. Many people use CDs to save for a short- or medium-term purchase, like a car or a down payment on a house. Whatever the case, you have the option to withdraw your funds without penalty during the grace period.

Invest your money in a different way

If you’re ready to move your money out of a CD but don’t need to spend it right away, you can move it to a different type of investment or account. You might consider investing in stocks, bonds or exchange-traded funds (ETFs), or simply moving the money to a savings account.

Disclosure: This article is for general educational purposes. It is not intended to provide financial advice. It also is not intended to completely describe any Citi product or service. You should refer to the terms and conditions financial institutions provide for various products.