What happens when a CD matures?

If you’ve been saving money in a certificate of deposit (CD), great job! CDs can be a safe and smart way to see your money grow, especially when interest rates are high. But CDs don’t lock your money away forever—and that’s a good thing. When your CD reaches its maturity date, you’ll need to decide what to do next with the money you’ve invested.

Do CDs automatically renew? In many cases, yes. However, you generally have to choose one of three options when CDs mature. You can:

1. Renew the CD with no changes.
2. Renew the CD but change the amount of money invested and/or its term length.
3. Close the CD and withdraw the money.

Considerations before and at CD maturity

Your money goals

What are you saving for? Is it a short-term goal, like a vacation or a down payment on a car? Or a longer-term goal, like retirement or your child’s college fund? If you need the money sooner rather than later, you might want to renew the CD for a shorter term or close it. If your goal is further in the future, renewing for a longer term could help you earn more interest.

Your timeline for needing access to the funds

CDs are best for money you know you won’t need immediately, since most have early withdrawal penalties. If there’s a chance you’ll need the money before the CD matures, consider a shorter-term CD or a savings account.

Tip: Build a CD ladder for more flexibility: If you’re attracted to the higher interest rates CDs offer but prefer being able to access some of your money periodically, a CD ladder strategy might help.

To build a ladder, you split your money among two or more CDs with different maturity dates. For example, you could open 1-year, 2-year, and 3-year CDs at the same time. When each CD matures, you can withdraw the money if it’s needed or renew the CD to continue earning interest. This gives you the option to access some of your money periodically while keeping the rest saved at higher interest rates.

How CDs compare to other savings options

CDs typically offer fixed interest rates—unlike the variable rates offered by most traditional savings, checking, and money market accounts. In exchange for this fixed rate, you agree to leave your money in the CD for the full term.

By comparison, savings accounts allow you to withdraw money at any time, but their interest rates are not guaranteed. CDs may offer a higher interest rate than other types of accounts. Consider comparing rates across different types of savings products, and keep in mind that different CD terms may have different rates.

It’s also worth comparing CDs to other investment options like stocks or bonds. With CDs, you know exactly how much interest you’ll earn, and your principal and interest paid are protected up to Federal Deposit Insurance Corporation (FDIC) limits.

Investments like stocks have the potential for higher returns but a greater risk of losing money. Diversification across asset classes is often a smart decision—but the right way to allocate your savings and investments will depend on your risk tolerance and time horizon.

With these considerations in mind, determine what works best for you. Be sure to check your bank’s specific policies.

Option 1: Renew the full amount of the CD for the same term

If you do nothing when your CD matures, some banks automatically renew it for you after a grace period with the balance. The new CD may have the same term as the old one. So if your CD was for 1 year, the new one may also be for a 1-year term.

The interest rate on the new CD typically reflects the bank’s current rate for that term on the day the CD matures. This rate might be higher or lower than the rate you had before.

Remember, the new interest rate won’t be locked in until the maturity date of the CD you had previously, even if you give instructions before that time. Your new rate will reflect the rate of your selected CD term on your CD maturity date.

Option 2: Renew the CD but change the amount of money invested and/or its term length

You can choose to renew your CD but make changes by updating the amount of money you put in and/or the length of the new term. For example, you could add more money to the CD to help it grow faster. Or you could select a different term that offers a higher interest rate.

Many banks let you update your CD instructions shortly before the maturity date, typically within a set window. You might also be able to make changes during a brief grace period after the CD matures. If you give instructions in advance, the bank will usually apply them on the maturity date, and the standard grace period may not apply.

Most banks let you add or withdraw funds for a CD using internal transfers or ACH transfers with linked accounts. Some also support checks or wire transfers, but these may require contacting the bank to arrange them.

Option 3: Close the CD and withdraw the money

When your CD matures, you can choose to close it and withdraw all of the funds.

To cash out a CD at maturity, you’ll need to notify the bank that you want to close the account and specify how you’d like to receive the funds. Most banks offer several withdrawal options, such as transferring the balance to another eligible account or a linked external account. Many also allow you to request a check or wire transfer.

Penalty for early CD withdrawal

Can you close a CD early? Technically, yes. But if you close a CD before its maturity date, you’ll probably pay a CD early withdrawal penalty. So it’s best to wait until the CD matures to close it—unless you really need the money sooner.

Whether your savings goals are short-term or long-term, a CD can be a great option for guaranteed and predictable returns.

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The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Discover, a division of Capital One, N.A., or its affiliates.