Skip to main content
Log In

How to Manage CDs and What to Do After a CD Matures

Certificates of deposit (CDs) are accounts with stable returns that offer attractive rates for savings, making them a popular choice among individuals seeking to meet short and long-term savings goals. By understanding how to manage CDs and what to do after they mature, you can better optimize your savings strategy.

What is a CD?

A certificate of deposit (CD) is a type of savings account that keeps the deposit for a set amount of time, called the term, and usually pays a fixed interest rate. The terms for CDs can vary widely, with typical options being 3 months, 6 months, 1 year, 2 years, 3 years, 4 years, and 5 years. When the CD matures, which means the term ends, the account holder can withdraw the principal and interest, let the CD renew or rollover, or use some or all that money to open new CDs.

This variety allows you to choose the CD terms that best fit your savings goals and budgeting needs. CDs can be an attractive option for those looking to grow their savings while minimizing risk.

Why are CDs a good option?

Let’s look at a few reasons why CDs might be a good fit for you:

  1. Predictable return. One of the primary benefits of CDs is their predictable return. Unless you open a variable-rate CD, you can get a fixed interest rate for the entire term. This means you can accurately forecast how much you'll earn by the maturity date, making it easier to plan for the future. A CD can provide a stable return in what might be changing market conditions

  2. Flexible term options. CDs come with a range of term lengths, typically ranging from 3 months to 5 years. This flexibility allows you to choose CDs that align with your savings goals. For instance, if you need short-term savings for a specific goal, such as an upcoming vacation, you can choose a CD that matures just before the time you'll need the money. If you're planning for a long-term objective, you can select a long-term CD that may offer higher interest rates. This variety means you can create a diversified savings strategy

  3. FDIC insured. CDs offered by insured banks are protected by the Federal Deposit Insurance Corporation (FDIC) for amounts up to at least $250,000 per depositor, per institution per ownership category

What to know about managing CDs

Effectively managing your CDs can help you to maximize their benefits and align them with your savings goals. Here are some considerations to help you manage your CDs:

  1. Know your term length and penalty for early withdrawal (if any). Each CD comes with a maturity date, which is the date when you can access your principal and interest without penalties. Many financial institutions impose fees for withdrawing funds before the maturity date, which can significantly impact your earnings. If you would like to preserve access to the money, you might look for CDs that allow for penalty-free withdrawals before maturity

  2. Monitor your account over time. CDs are usually a low-maintenance form of savings, but it still pays to keep track of them. Keep up on interest rates, too, especially as the time nears for your CD to mature and you start to consider opening new accounts. Changes in market interest rates could affect your financial institution’s offerings, and knowing when rates might be rising can help you make decisions regarding getting new CDs or cashing out. Learn about your financial institution's policies and any fees associated with your CD. This can help you avoid surprises

  1. Have a plan for when they mature. Before choosing a CD, think through your strategy for what you will do when it matures. This requires understanding the options available from your bank and your overall financial picture, including your savings needs and upcoming expenses

  2. Set up a CD ladder. Instead of putting all your money into one CD, you could build a CD ladder by spreading your money over multiple CDs with varying terms. You can arrange things so that a portion of your money becomes available periodically as each CD matures, while the rest remains in the other CDs on the ladder

What to do when a CD matures

When you open a CD, the term will be stated clearly in the agreement. Banks typically will notify you before the maturity date hits. The notification is likely to include information about any grace period that applies to your CD and describe your options. When your CD matures, certain things may happen, including:

  1. Access to your money. You'll have the option to access your principal, which is the initial amount you deposited, as well as the interest earned on the deposit

  2. Grace period begins. Most banks provide a grace period during which you can determine how to proceed with your account without any penalties

  1. Automatic renewal. If you take no action, banks may renew your CD automatically for the same term and at the prevailing interest rate. That might not be the best rate being offered at the time, and it could be lower than the rate for your old CD 

  2. Account closure. In some cases, banks may close the account when it matures and send you your deposit and interest

Meanwhile, you may have several options to consider, including:

  1. Cash out the deposit and interest earned. You can withdraw your initial deposit and the interest you've earned. If you were saving for a particular purchase, you should be closer to your goal

  2. Open another CD. You could place some or all the money in a new CD or multiple CDs with different terms and interest rates. Your choices will depend on your new financial outlook and goals

  1. Put it into savings. You may choose to transfer the funds into a savings account where you'd have access to the money as needed. This could be to your advantage if you had saved the money for a set purpose, like buying a car, but need time to shop

  2. Renew the CD. Renewing the CD is an easy way to continue building toward your goals. Just talk to your bank about how to get the most favorable interest rate possible

CDs from TD Bank

This article is for general informational purposes only. It is not intended to provide specific financial, investment, tax, legal, accounting, or other advice and should not be acted or relied upon without the advice of a professional advisor. A professional advisor will recommend action based on your personal circumstances and the most recent information available.

1Partial and full withdrawals may be made without penalty during a ten (10) day grace period that begins on the maturity date.

Have a question? Find answers here

Popular Questions