Missed your CD’s maturity date? Here’s what to do

A certificate of deposit (CD) is a bank account that typically comes with a set term, or timeframe, during which you agree to leave your funds untouched. When the CD matures, you can withdraw your principal and any interest you earned. Or, you can roll the money into a new CD at the bank or a different bank.

But if your CD matures and you forget about it, there’s a good chance your bank will just roll your funds into a new CD. That new CD’s interest rate might be lower than what you’d like and your money will be tied up again for the length of that renewed CD.

If you want to get your money out after missing your CD’s maturity date, you need to weigh your options — and the associated pros and cons with each — before deciding what to do next.

First, check if you’re still within the grace period

A CD’s grace period is a brief window around its maturity date during which you can withdraw your funds without paying a penalty or tell the bank that you wish to renew the CD. “There is typically a grace period of seven to 10 days in case the CD just recently rolled over,” says Greg McBride, CFA, Bankrate chief financial analyst.

If your CD recently matured, you can check to see if you’re still within the grace period by logging into your bank account or contacting the bank directly.

If the grace period has ended, the bank has likely renewed the CD automatically. In this case, your options include leaving the money in the new CD until it matures or withdrawing the funds and likely paying an early withdrawal penalty.

If you need the funds immediately due to a job loss or other emergency, you may have no choice but to close the renewed CD and pay the early withdrawal penalty.

If you can hold off on withdrawing the funds from the new CD, you might be able to keep the penalty from eating into your principal. For instance, say the CD’s early withdrawal penalty is two months’ worth of interest. If you wait two months before cashing out the CD, the penalty will subtract interest that’s now been earned. If you cash in the CD before two months are up, however, the penalty will actually subtract money from your principal. (The principal is the amount of money the account originally started with — or, the total balance minus the interest earnings).

If you don’t need the money now, do some math and research

If you don’t need the money to pay for immediate expenses, take some time to decide whether it would be better to keep your money in the current CD or withdraw the money for other investments. Here are some strategies to help you figure out what’s worth it.

1. Calculate how much interest you’ll earn in the renewed CD versus other accounts

Determine the total amount of interest you’d earn if you kept the money in the renewed CD. A CD calculator can provide this dollar amount when you enter the term length, initial deposit amount and annual percentage yield (APY).

Then, shop around for the best rates on new CDs or savings accounts. For CD rates, compare APYs with the same term you have now or another term length that works well for you. For savings accounts, look at the APY and ease of access to your funds.

The best CD APYs and savings account APYs can often be found from online-only banks and credit unions. (Keep in mind that depending on the current rate environment, it’s possible you won’t find a better rate than what you were earning.)

If you know you want to keep the money in some kind of a CD, calculate how much you’d earn with a totally new CD. The difference in interest, or lack thereof, might convince you to stay in the rolled-over CD. Or it might motivate you to pay the early withdrawal penalty and move your money elsewhere.

2. Calculate how much the early withdrawal would cost you

When deciding whether it’s worth it to break the renewed CD, factor in the amount of the early withdrawal penalty. This can vary based on the bank and the CD’s term length, so you’ll need to locate the rule in your CD’s terms and conditions.

Early withdrawal penalties are often based on a number of days’ worth of interest. For example, some banks may charge as little as 30 days’ worth of interest for a 1-year CD penalty while others may charge 180 days’ worth. As such, your penalty amount will depend on your bank’s policies and how much money is in the CD. Depending on when you withdraw, the penalty could potentially eat into your principal.

To figure out how much you’ll pay in an early withdrawal penalty, calculate how much interest you’re earning in a day or a month, and then multiply that by the number of days or months of interest you would need to forfeit.

3. Subtract the early withdrawal penalty from the principal

Once you know how much you’ll pay in an early withdrawal penalty, subtract that amount from your principal. This way, you can determine if it’s worth it for you to walk away and put that money elsewhere. For example, you can use this information to see if you’ll end up with a larger amount in a new CD, even with the penalty you’ll need to take to get there, or in the one that currently holds your money.

Here’s an example of how to calculate if a withdrawal penalty is worth it

Here’s the scenario: You forgot about your one-year CD and it automatically renewed for another year at the bank’s new going rate, which is 3 percent APY. Your old CD earned 4.50 percent APY so you’re not jazzed about the new rate and wonder if there’s something better out there. 

You have $10,565 that rolled over into the renewed CD. You need to calculate whether it’s worth keeping the renewed CD open or taking the early withdrawal penalty and moving the money to a different, higher-paying CD.

• If you leave the CD alone until it matures, you’ll earn $316.95 in interest.
• The bank charges 90 days’ worth of interest as an early withdrawal penalty. That means you’ll lose $78.36 (which will be taken out of your principal, since you haven’t had time to earn interest yet). So, you’ll withdraw about $10,486 from the CD if you decide to cut your losses quickly. 

Next, compare what you could earn in a new CD at a higher rate. You found a 1-year CD that pays 4.40 percent APY. 

• If you deposit that $10,486 (your new principal, after the penalty) into a new one-year CD at 4.40 percent APY, the CD will earn around $461 in interest. 

Finally, calculate the bottom line.

Ultimately, you’d earn over $144 more in the new CD, even after factoring in the withdrawal penalty you had to take. If that difference is worth the administrative effort to withdraw a CD early and start a new one, go for it. 

Bankrate’s McBride recommends leaving the money in a CD if it’s already earning a high rate. “If you’re earning a competitive return in the CD and don’t need the cash during the term, it’s best to let it ride,” he says. “You only want to incur that early withdrawal penalty if that is the lowest cost option for getting your hands on needed cash before the maturity date.”

Alternatives to reinvesting money in a new CD

Whether you break a CD mid-term or access the money at the time of maturity, it can pay to consider other places to put the money instead of in a new CD. The best place for the funds can depend on the going rates as well as how soon you may need to withdraw the money again.

A high-yield savings account or money market account are better alternatives for easier access to your money. These accounts allow you to withdraw money whenever you want, but they don’t guarantee a set APY like a CD does. Rather, the bank can choose to change the account’s APY at any time.

Investing the money in the stock market is another alternative to CDs. You can potentially earn higher yields than you would in a CD, but you also run the risk of losing your principal.

How to avoid missing your CD’s maturity date

If you’ve missed a CD’s maturity date and want to avoid doing it again, here are a few practical strategies.

• Set up two calendar alerts: one for when your CD’s maturity date is approaching — this will give you the time to research your options and decide what’s right for you — and one for the actual maturity date, so you can take action depending on what you decide to do.
• Pay attention to your bank statements for notifications when your CD is reaching maturity. Banks may also choose to notify you over email, through an in-app notification or through a written notice.
• If you have multiple CDs with different banks, keep information about all of the CDs organized in one place to help you keep track of each of their maturity dates. This could mean using a spreadsheet, a notebook or an app — whatever works for you.

“Make sure your contact information is up to date so you receive the reminder emails that come out prior to maturity,” McBride says. “And by all means, make note of the maturity date in your phone, on your calendar, wherever you need to, so you don’t miss it again.”

Note that banks are required to send you a notice before a CD’s maturity if the term is longer than one year and if the CD doesn’t renew automatically.

Bottom line

If you’ve missed your CD’s maturity date, what you should do next depends, in part, on how soon you need the funds and if you can find a much higher-paying CD. Closing a renewed CD early will likely incur an early withdrawal penalty, detracting from your total earnings. Factor in this penalty when deciding what to do next, and be sure to take some practical steps to avoid missing a CD’s maturity date going forward.