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When you sign up for a certificate of deposit (CD), you agree to leave your money in a particular account for a specific period of time. It may take a few months or a few years. Once this time has elapsed, your CD will mature and your money will be returned to you with the interest it has accrued. At this point, your CD supplier will write to you outlining your options.
Generally, you can either withdraw the funds at this point or let them roll over to a new CD. Every bank and credit union has different rules, but in most cases you don’t have to do anything to roll your CD. Just make sure you know the rules that apply to your CDs and be sure to check the rate you will be paid for the new CD, as it might be lower than the previous one.
Key points to remember
- At the end of your CD’s term, your money will be returned to you with the interest it has accrued.
- As the end of the CD’s term approaches, your CD supplier will inform you of your options.
- Your choices are usually to withdraw the funds or transfer them to a new CD.
- Be sure to check the price of the new CD if you choose a rollover, as it might be lower than the previous price.
How to Roll on a CD
For most CDs, you don’t have to do anything to turn them into a new CD of similar length. Most CDs held by most banks and building societies will be automatically replaced if you do nothing.
Each bank, credit union, and other CD provider has its own rules when it comes to CD maturities. As your CD approaches maturity, your vendor should write to you and explain your options. Generally, they will offer you three options:
- Transfer funds to another bank account. Options include a savings account, checking account, or money market account.
- Remove the product. They can be transferred to an external bank account or mailed to you as a paper check.
- Roll on the CD in a new CD to this bank. Typically this would be in a CD that best matches the length of your maturing CD. For example, if you have a one-year certificate that is ending, they will likely transfer your balance to a new one-year CD.
For most CDs, the third option is the default: if you do nothing, your CD will be replaced with a new one that matches the duration of the old one. You should, however, check with your provider what their rules are, as each provider sets their own.
Although most CDs automatically convert to a new CD if you don’t withdraw the funds at maturity, you may not receive the same interest rate as with the previous CD. You should check with your CD supplier about the interest rates they will pay on new CDs to avoid a nasty surprise.
Find the best CD prices
Although most CDs will roll over if you do nothing when they mature, this does not necessarily mean that the terms of the CD will be the same. Your bank will usually place your money on another CD of the same length as the CD that just matured. For example, if your six-month CD is coming due, you may have 10 days after the due date to instruct your bank. If you don’t provide new instructions, your bank can put the money in another six-month CD.
That doesn’t necessarily mean you’ll earn the same rate as before, though. When a CD flips, it is equivalent to the end of the previous CD and a new beginning. The interest rate paid by your provider on new CDs may have changed since you purchased yours, and if rolled over, you will receive the new rate. This may be more or less than what you earned on the previous CD.
If you want to maximize the yield on your CDs, that means paying attention to when your CDs mature and trying to find the best rate possible. Interest rates on CDs depend on a variety of factors, some of which are beyond the control of individual institutions (such as the prime rate and the Fed rate). However, there is a wide variation in how much each vendor will pay, so it’s as important to hunt for the best deal when rolling your CD as when you first release it.
What happens when a CD matures?
When a CD matures, your bank or credit union will write to you to explain your options. You can normally withdraw your funds from the CD, or allow it to roll onto a new CD. If you do nothing, most vendors will automatically replace your CD with a new one.
Will the interest rate on my CD change if I roll?
It could. Your bank will likely turn your CD into a CD with a similar term, but will pay the interest rate available to new CD customers. This may be higher or lower than your previous rate.
What happens if I do nothing when a CD matures?
It depends on who you are holding the CD. Most financial institutions will turn your CD into a new CD with a similar term. Others may withdraw your funds to another type of account. You should check with your provider to be sure of the rules that apply to your accounts.
The essential
When a CD matures, your bank or credit union should write to you outlining your options. Typically, you will have a short window to withdraw your funds. If you do nothing, your CD will probably turn into a new CD.
The term of your new CD will normally be similar to that of the previous one, but the interest rate may be different. Your bank or credit union will pay you the same interest rate as new CD customers, and this rate may be lower or higher than your previous rate. If you want to make sure your CD is paying the highest rates possible, you need to shop around each time your CD comes due.