Many people use certificates of deposit (CDs) as a safe, predictable way to grow their retirement savings. But what do you do when your CD matures? You’ll enter a short grace period where you can withdraw your funds, reinvest them or explore other financial options.
Understanding your choices and acting quickly can help you avoid missed opportunities. Here’s what happens when a CD matures.
What is a CD grace period?
A grace period is a short window — typically between seven and 10 days after your CD matures — when you can decide what to do with your funds.
During this time, you can:
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Withdraw your money without paying early withdrawal penalties.
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Reinvest it into another CD with a term and interest rate that better fits your goals.
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Let the bank automatically renew it into a new CD term at the current interest rate.
Let’s say you have $10,000 in a one-year CD earning 4% interest. When it matures, your bank gives you a 10-day grace period to decide what to do. If you don’t act, the bank will automatically renew your CD for another year at the current interest rate — which could be higher or lower than before.
If rates have increased to 4.5%, you’ll lock in the higher rate for the next term. But if rates have fallen to 3%, you’d earn less money over the next year unless you found a better alternative.
Related reading: 5 smart moves after you’ve saved $10,000
📌 Avoid this common mistake when your CD matures
“The most common mistake I’ve seen when a CD matures is the investor doesn’t mark their calendar for the maturity date approaching,” says Krisstin Petersmarck, investment advisor representative at New Horizon Retirement Solutions. “They forget about it, and the CD automatically rolls over into a new one, not giving them the chance to choose a better option.”
Set a reminder on your phone or calendar at least a week before the maturity date so you have time to evaluate rates, your options and whether it makes sense to renew or cash out. If your bank offers email or text alerts, enable them to avoid missing this important deadline.
Dig deeper: Common banking mistakes costing you money — and how to avoid them
Your options when a CD matures
When your CD matures, you have three main options: roll it into a new CD, withdraw your money or let the bank automatically renew it. Here’s how each option works — and when it might (or might not) be the right choice for you,
1. Roll the money into a new CD
Your first option is to roll the funds into a new CD. This could work if you don’t need the money right away and want to continue earning a guaranteed interest rate. You can open the new CD at your current bank or shop around for better rates elsewhere.
“If a retiree is looking for guaranteed returns and the CD is still offering a high-yield interest rate and term, and they are comfortable leaving their money tied up, then it can be a viable option,” says Petersmarck.
But the biggest downside is that your money will be tied up until the new CD matures, and if rates rise after you lock in, you could miss out on better returns later.
2. Close the CD
If you need the money for an upcoming expense or to build an emergency fund, cashing out your CD is another option. You can withdraw your initial deposit plus any earned interest and move the funds wherever you see fit.
You could reinvest the cash from your CD into a number of options:
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High-yield savings account. This is the best place to park your cash if you’re unsure what to do with it next. You’ll earn interest and keep your money accessible while you figure out next steps. A savings account is also a good place for money you plan to use soon.
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High-yield money market account. This has all the same benefits of a high-yield savings account but with a debit card and limited check-writing capabilities.
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I Bonds or Treasury securities. These are safe investments that protect against inflation.
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Investments. Bonds, ETFs, mutual funds or dividend stocks might be a good place to reinvest money once a CD matures if your goal is long-term growth. Many of the best investment platforms offer low-cost ways to get started.
🔍 Expert tip: Cashing out your CD to pay down high-interest debt
You can also use your CD funds to pay off debt. “I once advised a client to cash out their matured CD to pay off high-interest credit card debt,” says Antwyne DeLonde, founder of VisionX Finance. “It saved them more in interest than the CD was earning.”
3. Let the CD renew automatically
The last thing you can do when your CD matures is nothing. If you don’t take action during the grace period, your bank will likely renew your CD with the same term at the current interest rate. This happens by default at most banks and can work well if you’re satisfied with your bank’s rates and terms.
However, it can also be risky. Automatic renewals can lock you into a lower rate or longer term than you want. “You might get stuck with a term that no longer fits your goals or an interest rate that’s far lower than what other banks are offering,” says Petersmarck.
How to make the best decision for your CD
Choosing what to do when your CD matures comes down to your financial goals, market conditions and how soon you’ll need access to your money. Here are some things to consider before making your next move:
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Check current CD rates. Don’t settle for your current bank’s renewal offer. Compare CD rates and terms across different types to confirm if you’re getting the best return for your savings.
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Consider short vs. long terms. Shorter terms give you more flexibility, while longer terms can help you prolong a good rate. Choose based on when you’ll need the money.
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Look at the economic environment. If interest rates are rising, consider shorter-term CDs or HYSAs, which can adjust with market conditions. If rates are dropping, locking in a longer-term CD could secure a better return.
What is a CD ladder?
A CD ladder is a savings strategy designed to spread out your money across multiple CDs to leverage high rates without tying up your full investment into one long-term CD. The result of CD laddering is access to a portion of your investment at regular, timed intervals. Learn how to build a CD ladder that helps you lock in today’s highest rates while enjoying rolling returns — before today’s best rates are gone.
🔍 Pro tip for managing multiple CDs
“Put maturity dates on your calendar a week before they’re due, with two alerts,” advises Petersmarck. “That way, if you miss the first one, you still have a backup alert.”
Similarly, DeLonde suggests creating a dedicated financial calendar: “We helped one client with several CDs across different banks by setting up a Google Calendar with notifications. This ensured they had time to decide what to do with each one.”
Dig deeper: How much should you keep in a CD?
FAQ: Certificates of deposit and your savings
Still wondering what to do when a CD matures? Here are answers to common questions to help you navigate next steps with your savings.
How do I know when my CD matures?
Your bank will typically notify you by mail, email or an online account alert when your CD is close to maturing. Be sure your contact information is up to date so you don’t miss important notifications. Also, set your own reminder a few weeks before the maturity date.
Can I cash out my CD before it matures?
Yes, but you need to weigh if breaking a CD early is worth it. Most CDs charge early withdrawal penalties unless you have a no-penalty CD. The penalty can be several months’ worth of interest, and in some cases, it may even eat into your initial deposit amount.
Do I have to pay taxes on a CD when it matures?
Yes, interest earned on a CD is considered taxable income. Even if you leave the money in the bank after it matures, the interest earned must be reported on your tax return. Your bank will typically send you a 1099-INT form for tax filing to report any interest earned that year.
What should I not do when my CD matures?
Avoid letting your CD automatically roll into a new term without reviewing current rates or terms. You could get stuck with a lower interest rate or a term that doesn’t fit your goals. Also, avoid moving the money into a traditional savings account with a low interest rate. A high-yield savings is much better than a CD if you need frequent access.
Which is best for flexible savings: a no-penalty CD or a high-yield account?
Both are low-risk investments that offer a safe way to grow your money while earning interest without paying a fee for withdrawals. Yet which is better comes down to your deposit amount, need for access and savings goals. Learn how they differ — and what to consider — in our comparison guide to no-penalty CDs and savings accounts.
About our writer
Cassidy Horton is a finance writer who specializes in banking, insurance, lending and paying down debt. Her expertise has been featured in NerdWallet, Forbes Advisor, MarketWatch, CNN Underscored, USA Today, Money, The Balance and Consumer Affairs, among other top financial publications. Cassidy first became interested in personal finance after paying off $18,000 in debt in 10 months of graduation with an MBA. Today, she’s committed to empowering people to stand up and take charge of their financial futures.
Article edited by Kelly Suzan Waggoner
