Whether you’re saving for a rainy day fund, a dream wedding or any other financial goal, you’ve got plenty of options for where to store and grow your savings. One safe and reliable choice is a certificate of deposit (CD).
With this type of account, your funds are held for a certain amount of time, in exchange for a locked-in interest rate. Generally, the longer you're willing to leave money in a certificate of deposit, the better the annual percentage yield (APY) you're likely to get.
But what happens after your CD term is up? It’s time to decide what to do with your money next.
Understanding CD maturity
When you open a certificate of deposit account, you choose the term length. At the end of the CD term — known as the CD maturity date — your initial deposit and the interest earned is now available to you. You have a few options for what to do next, and typically, you’ll have about a 10-day grace period to decide what’s best for you.
Tip: We’ll notify you when your CD is reaching maturation, but as an extra reminder, set a calendar notification for yourself, so you have enough time to consider your options.
Take quiz: Which CD best fits your savings goals?
What are your options when a CD matures?
So, your CD term is up. What’s next? Here are three different routes to choose from:
1. Renew the CD
Typically, if you leave your CD untouched after it hits its maturity date, it will automatically roll over into a new term. Your original deposit amount will stay the same, but the interest rate will reflect the current rate (so be aware if it has changed).
At this point, you can also modify the terms to fit your needs. You may want to adjust the deposit amount, select a different term length or start a CD ladder (more on that below). Compare CD rates to make sure you’re getting the best deal for your needs.
We’ll notify you when your CD is reaching maturation, but as an extra reminder, set a calendar notification for yourself, so you have enough time to consider your options.
2. Withdraw your funds
Withdrawing money from your CD before it hits maturity will likely incur penalties (unless you have a No Penalty CD, which allows you to withdraw funds any time after the first six days following the date you fund the account). But once your term is up, you can safely withdraw your money fee-free. You can now use the funds for whatever you need, whether it’s to spend it or put it toward a different goal in another account.
3. Explore other savings options
CDs are just one of the many ways to make the most of your money. Once your CD matures, it’s smart to evaluate current interest rates to see if rolling your funds into another CD is the best option for your funds. If you’re not sure about tying the money up in a CD, you might also consider moving the money to a more accessible type of account, like a high-yield Ally Bank Savings Account or an Ally Bank Money Market Account, so you’re still earning interest on it.
Stagger maturity dates with a CD ladder
If you want a savings strategy with short- and long-term benefits, consider CD laddering. With this strategy, you open several CDs with maturity dates that are spread out, so some of your cash is available to use or roll over at regular intervals. That way you can get better interest rates without keeping all your money tied up at once.
Factors to consider before making a decision about your CD
Not sure which next step is best for you? Think through these factors first:
Savings account vs. CD: Compare the benefits between keeping your funds in a CD versus moving them to a savings account. For example, if you know you’ll need access to your funds soon, a high-yield savings account or a money market account will likely be a better choice.
Interest rates offered: Interest rates frequently fluctuate, so take the time to compare rates between options to ensure you’re getting the best possible return on your deposited amount.
Advisor consultation: If you need help planning for your long-term goals, a financial advisor can guide you to better understand the implications of each option and find the best choice for you.
Stay informed and prepared
Whether your CD lasts a few months or several years, keeping track of your maturity date will help you prepare for your next steps as soon as your term is up. It’s always important to periodically review your savings strategy, so take the time to revisit your goals and adjust your accounts as needed. With each maturity date, you have an opportunity to fine-tune your plan and continue your savings momentum.
