Key insights:
- When a certificate of deposit (CD) term ends, you have a grace period to make changes to your account
- If you don’t do anything during the grace period, your CD renewal will typically happen automatically
- It’s important to prepare for the grace period because automatic CD renewal may not always be the best choice for your finances
A CD is a type of savings account that requires you to deposit funds for a set period of time, called the term. In exchange, you can often earn a higher annual percentage yield (APY) than a standard savings account. If you withdraw the funds before the term ends, you’ll typically face an early withdrawal penalty.
At the end of the term, the grace period is your opportunity to make changes. Typically, you can either add or withdraw funds, change your CD type or opt for CD renewal.
Understanding how CD renewal works can help you lock in a rate that fits your goals and avoid fees. Let's take a deeper look
What happens when your CD matures?
When a CD reaches the end of its term, it’s called maturity date. At this time, you can withdraw your initial deposit and any interest earned without penalty. During the grace period (typically 7–10 calendar days), you choose from 3 options: withdraw or add funds, renew your CD for a new term or move the money to another CD. If you don’t act within the grace period, most banks automatically process a CD renewal for the same or a similar term at the APY and interest rate in effect on maturity date.
How does CD renewal work?
If you don’t act, many banks will renew your CD automatically once the grace period ends. If your bank doesn’t renew the CD automatically, you may need to contact them or select a term and confirm the rate, you may be able to do this in your mobile banking app or online. Even when renewal is automatic, make sure you review the new APY and term length. Interest rates can change with market conditions, so your CD renewal rate may be different than your previous one.
Can you renew a CD before maturity?
Generally, you cannot renew or add money to an existing CD before maturity. However, you may have a couple of options.
- Initial funding window: Some banks may have a grace period at the beginning of a CD term in which you’re allowed to make additional deposits
- Add-on CDs: If offered by the bank, an add-on CD is a special type of CD that allows you to make ongoing deposits throughout the term
Otherwise, you will have to wait for maturity to renew the CD.
Reasons to renew your CD
There are several reasons why CD renewal could be a good idea. You might consider renewing if:
- You don’t need the funds soon: If you won’t need access in the near term, CD renewal can keep your savings working with minimal effort.
- Rates have improved: If current CD rates are higher than they were during your original term, renewing your CD can lock in a better APY.
- You want a simple path forward: Automatic CD renewal helps you continue earning interest without extra steps.
- You want consistent growth: Letting your CD renew keeps interest compounding.
Reasons to skip CD renewal
CD renewal may not always be the best option for your financial situation. You may opt to skip CD renewal if:
- Rates have fallen: If current rates are lower, you may prefer a shorter term or a different savings option.
- You’ll need the money soon: CDs charge early withdrawal penalties, so renewing may limit flexibility if you have a big expense coming up.
- You want more access: If liquidity matters, a savings account could fit your needs better than a CD renewal.
- You want a different type of CD: You don’t have to stick with a standard fixed-rate CD. You could explore other CDs offered by your financial institution like bump-up or step-up CDs, which offer a rate increase during the term, or one of the other types we’ve covered here.
Tips to prepare for your next CD renewal
The grace period is a short window, so it’s important to prepare before making a decision. These tips can help you make the best use of the grace period.
- Note your dates: Mark the maturity date and grace period window so you can compare rates and choose a term in time.
- Check current rates before you renew: Rates change. Confirm the APY and term you’ll get at CD renewal.
- Right-size your term: Match the renewal term to your timeline — shorter if you expect to need funds soon, longer if you want to lock in a higher rate.
- Consider partial withdrawals: If your bank allows it during the grace period, you may be able to withdraw some funds and renew a CD with the remaining balance.
Consider a CD ladder
If you’re on the fence about CD renewal because you want both yield and access, you might build a CD ladder during the grace period. A CD ladder is when you split your balance across multiple CDs with staggered maturities. For instance, you could choose CDs with terms of 6, 12, 18 and 24 months. This approach gives you regular maturity points to capture rising rates while keeping part of your savings accessible without penalties.
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.
