What Should You Do When Your CD Matures?

A certificate of deposit (CD) is a type of savings account whereby you earn a fixed interest rate for a specified time. Because you're agreeing to put your cash away for a number of months or years, banks often offer higher interest rates for CD accounts than other types of savings accounts. When the CD's maturity date arrives, you have an important decision to make about what to do with the funds.

Let's take a closer look at some important things to consider before and after your CD matures.

What Is a CD Maturity Date?

The maturity date of your CD is the date when your account term ends. Standard CD terms may be three months, six months, 12 months or any number of years (generally up to five years). However, you may find shorter or longer CDs and accounts with unique maturity periods.

3 Options to Consider When Your CD Matures

When your CD maturity date is nearing, it's the best time to check into current rates at your bank and consider your financial needs.¹

Here are three options to consider:

• • Roll over with similar terms: If you don't specify that you want to withdraw, CDs often roll over automatically into a new CD for the same term, but are updated to the latest interest rates your bank offers.
•  
• • Withdraw your balance: On the maturity date, you can cash out and take your funds with no penalties. If not needed immediately, you may consider putting the funds into a high yield savings account after a CD withdrawal.
•  
• • Pick a new CD: You can also withdraw funds on the maturity date and choose a CD with a different term. For example, if your five-year CD matures and you want the benefits of a CD without a long commitment, you may want to open a new one-year CD.

Important Steps to Take Before Your CD Matures

Well before the maturity date, it's a good idea to take some time to consider your options and decide what to do when that date rolls around. In many cases, you can notify the bank before the maturity date if you don't want the CD to roll over. Rolling over may happen automatically if you don't take action.

Monitor interest rates

Interest rates can change at any time without notice. Interest rates for CD accounts tend to rise and fall with market interest rates and rate changes by the Federal Reserve. If you want to stick with the same bank or roll over your CD, follow your bank's interest rates to know what to expect if you stick with the same CD term.

Shop around for the most competitive rates

Sometimes, moving to a new bank can help you earn more than with your current bank. Online banks, like Synchrony Bank, tend to offer more competitive interest rates than traditional banks. They may also offer innovative CD products, such as a bump-up CD, whereby you can increase your CD rate if market rates increase.

Find the latest CD rates from Synchrony Bank here.

Consider Diversifying Your Savings and Investments

No rules confine you to a single CD term. Savvy households often create a CD ladder. With a CD ladder, savers spread their funds across multiple CDs with varying maturity dates (like a ladder's rungs), so some CDs mature sooner while others mature later. The idea is to ensure you regularly have access to portions of your savings without tying up all your funds for an extended period, but still get the interest rate advantages of a CD.

You may also mix and match between high yield savings accounts, money market accounts, CDs and stock market investments to diversify your risk and potential reward. Diversification can help you reach long-term financial goals, while keeping a portion of your funds in low-risk bank accounts and the remainder in riskier—but typically higher-return—investment accounts.

Make an Informed Decision When Your CD Matures

CD accounts play a vital role in the savings and investment plans of countless individuals. Whether you want to put funds away for 90 days or five years, a CD could be the right choice. Just ensure you understand how they work so you're not caught off guard by early withdrawal penalties.

If you have a CD nearing maturity, it's a perfect time to review rates and decide what you want to do next. Whether it's a CD rollover, full withdrawal or splitting your cash up among multiple accounts, you can make an informed decision when your CD matures.

Check out the latest CD offerings from Synchrony Bank here.

 

Eric Rosenberg is a financial writer, speaker and consultant based in Ventura, California. He is an expert in banking, credit cards, investing, cryptocurrency, insurance, real estate, business finance and financial fraud and security. His work has appeared in many online publications, including Time, USA Today, Forbes, Business Insider, NerdWallet, Investopedia and U.S. News & World Report. Connect with him and learn more at EricRosenberg.com.

 

LEARN MORE: What is a CD (Certificate of Deposit) and How Do They Work?