A certificate of deposit (CD) is one of the simplest and safest ways to grow your savings. But when your CD reaches its maturity date, many people aren’t sure what happens next or what they should do with the money.
The good news: once your CD matures, you regain full control of your funds without paying any penalties. From there, you can reinvest, withdraw, or move your money elsewhere depending on your goals.
This guide explains exactly what happens when a CD matures, what your options are, and how to make the smartest decision for your financial situation.
Understanding How CDs Work
A CD is a special type of savings account where you agree to leave your money untouched for a fixed period of time. In return, the bank pays you a guaranteed interest rate.
Think of it like lending your bank money for a specific period. The bank rewards you with interest for keeping your funds locked in.
For example:
-
You deposit $5,000 into a 12-month CD earning 4.50% APY
-
You agree not to withdraw the money for one year
-
At the end of the year, you receive your original $5,000 plus interest
CD terms typically range from a few months to several years. In general, longer terms offer higher interest rates.
What Does “CD Maturity” Mean?
The maturity date is simply the date your CD term ends. On that day:
-
Your original deposit (called the principal) becomes available
-
You receive all the interest earned
-
Early withdrawal penalties no longer apply
At this point, the bank removes restrictions on your funds, and you can decide what to do next.
You’ll Receive a Maturity Notice From Your Bank
Banks and credit unions usually notify you shortly before your CD matures. This notice may arrive by email or mail and will include important information such as:
-
Your CD maturity date
-
Your available options
-
The interest rate for renewing the CD
-
The deadline to make changes
This notification period is often called the “grace period,” and it typically lasts 7 to 10 days after maturity.
During this time, you can make changes without penalties.
What Happens If You Do Nothing?
If you don’t give your bank instructions, most CDs automatically renew into a new CD with the same term length. This process is called a rollover.
For example:
-
Your 12-month CD matures
-
You take no action
-
The bank automatically reinvests your money into a new 12-month CD
However, the new CD will use the current interest rate not your old one.
This can work in your favor if rates have increased. But if rates have dropped, you may earn less than before.
That’s why it’s important to review your options before the grace period ends.
Your Main Options When a CD Matures
When your CD reaches maturity, you have several choices. Each option depends on your financial needs and interest rate conditions.
1. Renew the CD
You can reinvest your money into a new CD, either with the same bank or a different one.
This option makes sense if:
-
CD rates are attractive
-
You don’t need immediate access to your money
-
You want guaranteed returns
Example:
If CD rates have increased from 4% to 5%, reinvesting could boost your future earnings.
2. Choose a Different CD Term
You’re not limited to the same timeframe. You can switch to a shorter or longer CD.
For example:
-
Choose a shorter term if you want more flexibility
-
Choose a longer term if you want higher interest
This allows you to adjust based on your current financial goals.
3. Move Your Money to Another Bank
Different banks offer different CD rates. Shopping around can help you earn more.
Even a small difference in interest rate can significantly impact your earnings over time.
Example:
-
Bank A offers 3.5%
-
Bank B offers 4.75%
-
On $10,000, that difference earns you $125 more per year
4. Transfer the Money to Your Savings or Checking Account
You can also withdraw the money entirely and use it however you like.
Some people use matured CDs to:
-
Pay off debt
-
Cover major expenses
-
Build an emergency fund
-
Invest elsewhere
Think of CD maturity as getting a financial “reset button.”
What Happens If You Withdraw Early?
If you take money out before maturity, banks usually charge an early withdrawal penalty.
This penalty may include:
-
Several months’ worth of interest
-
Or a fixed fee
In some cases, the penalty may reduce your earnings or even slightly reduce your original deposit.
This is why CDs are best for money you won’t need right away.
Liquid CDs: A Flexible Alternative
Some banks offer “liquid CDs,” which allow early withdrawals without penalties.
The tradeoff: these CDs usually offer lower interest rates.
They’re ideal for people who want:
-
Better returns than savings accounts
-
But more flexibility than traditional CDs
Choosing the Right CD Term Length
The best CD term depends on your priorities.
Longer CDs offer higher returns
But your money stays locked longer.
Shorter CDs offer more flexibility
But usually pay lower interest.
Ask yourself:
-
Will I need this money soon?
-
Am I comfortable locking it away?
-
Are interest rates rising or falling?
These answers help determine the best option.
A Smart Strategy: Use a CD Ladder
A CD ladder spreads your money across multiple CDs with different maturity dates.
Example:
-
$2,000 in a 6-month CD
-
$2,000 in a 12-month CD
-
$2,000 in a 24-month CD
This strategy gives you regular access to portions of your money while still earning strong interest rates.
It reduces risk and improves flexibility.
Are CDs Safe?
Yes CDs are considered one of the safest financial products available.
Most CDs from banks are insured by the Federal Deposit Insurance Corporation (FDIC), which protects up to $250,000 per depositor, per bank.
This means your money is protected even if the bank fails.
Do You Pay Taxes on CD Interest?
Yes. The interest you earn from a CD is taxable as income.
Your bank will send you a tax form showing how much interest you earned during the year.
Even if you don’t withdraw the money, the interest may still be taxable.
Please take a look at this as well:
CD Investment Basics: A Beginner’s Guide to Certificates of Deposit
