What Happens When a CD Matures?

If you’ve opened a certificate of deposit (CD), you likely did so to earn interest on your money in a low-risk, time-locked way. But when your CD reaches the end of its term—known as maturity—what comes next? Understanding what happens when a CD matures is essential for making the most of your investment and avoiding fees or missed opportunities. 

This blog walks you through the steps, decisions, and options you’ll face at maturity.

Understanding CD Maturity

Maturity marks the completion of your CD’s term. At this point, the funds you originally deposited, along with any interest you’ve earned, are available to you. The financial institution will typically notify you before the CD matures, giving you time to decide what you want to do with your money.

It’s important to note that most banks have a grace period after maturity—usually 7 to 10 days—during which you can withdraw or reinvest your funds without penalty. If you miss that window, your money might automatically roll over into a new CD of the same term, potentially locking in a different interest rate.

Common Options at CD Maturity

When your CD matures, you generally have a few options to choose from:

1. Withdraw the Funds

The most straightforward option is to take your money out. You’ll receive your original deposit plus any earned interest. This might be the best route if you need the funds for a specific goal or if you’re ready to move the money into a different type of account.

2. Renew the CD

Many banks allow you to renew the CD automatically for another term. You can choose to reinvest the entire amount, just the principal, or only the interest. Before going this route, it’s a good idea to review the new interest rate and term to ensure it still aligns with your financial goals.

3. Move the Funds Elsewhere

If you want to continue earning interest but aren’t satisfied with the renewal terms, you might move your funds into another savings product. You could transfer the money into a high-yield savings account or shop around for a better rate on a different CD.

Some savers also use this opportunity to diversify their holdings, placing a portion into bonds, mutual funds, or other vehicles that offer different risk and return profiles.

What to Expect From Your Bank

When your CD approaches maturity, your bank or credit union will typically notify you in writing or through online banking alerts. This notice usually includes:

• The maturity date
• The current balance, including interest earned
• Renewal options and the new interest rate
• The length of the grace period
• Instructions for accessing or reinvesting your funds

You may be required to call, visit a branch, or log in online to confirm what you want to do with the funds. If no action is taken, most institutions automatically reinvest your money.

Planning Ahead: Why It Matters

It’s easy to overlook your CD as it quietly earns interest over months or years. But waiting until the last minute to decide what to do at maturity can lead to less-than-ideal outcomes. Automatic renewal may lock your funds into a new term with a lower interest rate, or you could miss the grace period and face early withdrawal penalties.

Here’s how to plan ahead:

Track the Maturity Date

Keep a record of your CD’s end date and set reminders a few weeks in advance. That gives you time to evaluate your options without pressure.

Compare Current Interest Rates

CD rates fluctuate with the economy. The rate you locked in a year ago might no longer be competitive. Look at rates offered by other financial institutions to determine whether it’s time to shop around.

Assess Your Financial Goals

If your financial situation has changed, your approach to saving might need an update. A maturing CD savings account is a chance to reevaluate whether you want to prioritize accessibility, growth, or stability.

How Taxes Are Handled

While CDs are low-maintenance from a management standpoint, there are still tax implications. The interest you earn on a CD savings account is considered taxable income in the year it’s earned—even if you don’t withdraw it until the CD matures.

Banks typically send you a 1099-INT form if you earn more than $10 in interest during the year. Be sure to include this income on your tax return to stay in compliance with IRS requirements.

CD Laddering Strategy After Maturity

If you’re not ready to spend or fully cash out your funds, you might consider CD laddering. This strategy involves spreading your savings across several CDs with staggered maturity dates. As each CD matures, you can reinvest it into a longer-term option at potentially higher interest rates.

This method offers several benefits:

• Greater liquidity than locking all your funds into one long-term CD
• More frequent access to maturing funds
• The opportunity to reinvest at rising rates

For example, if your 1-year CD matures and interest rates are rising, you can move that money into a new 3-year CD and continue the ladder while still having another CD maturing soon.

Tips to Maximize CD Maturity

To make the most of your maturing CD, consider these best practices:

• Act promptly: Don’t let the grace period pass without a decision.
• Review the new terms: If you’re renewing, confirm that the interest rate and term are favorable.
• Don’t overlook fees: Some institutions charge account maintenance or early withdrawal penalties, even after maturity in certain cases.
• Ask about partial withdrawals: If you only need some of the funds, ask your bank whether partial withdrawal is allowed without affecting the rest of the deposit.

Conclusion

When a CD savings account matures, it presents a valuable financial decision point. You’ve earned interest on your money by committing to a fixed term—now it’s time to decide what comes next. Whether you reinvest, withdraw, or pivot to another savings option, your choice should align with your current financial needs and future goals.

By planning ahead, reviewing your options, and understanding how the process works, you can use CD maturity to your advantage. As with any financial product, staying informed is the key to making the most of your savings.