Next steps when your CD reaches maturity

Whether it’s a rainy day fund, a dream vacation, or any other financial goal, you have a lot of options for how to save. One safe and reliable choice is a certificate of deposit (CD). With this type of account, the bank lends the money out to earn interest and pays you interest for the use of your funds. 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.

When you open a CD, you choose the term length. At the end of the CD term — the CD maturity date — you get to decide what to do with your funds next. Understanding your options can help you choose the right path for your financial future.

When a certificate of deposit reaches the maturity date, you decide what you want to do with it. You will be notified when your CD has reached maturity. At that time, you will likely have a grace period of about 10 days during which the bank will not charge you or change anything about your account.

If you don’t do anything with your funds when that time frame is up, your bank will likely renew the CD at the same term, but the interest rate may change. But that’s not your only option. Know when your CD is about to reach maturity, so you have time to decide what’s the best choice for you.

When your CD reaches maturity, you have three different routes to choose from.

If you don’t need the money now, you may choose to put the funds in a new CD with a higher interest rate. Compare rates to make sure you’re getting the best deal. You may choose a CD with the same term length or one that’s shorter or longer.

A second option is to allow your bank to renew the CD. Your bank will likely give you the rate it offers for new CDs, but it’s still wise to shop around to make sure you’re getting the best rate possible.

Lastly, you can take your money out and transfer it into a different account. You should compare rates across banks and also consider different types of CDs. You may even choose to put the money in another account type like a money market account or savings account. The type of account that works best for you depends on your goals and timeline.

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 that some of your cash is available to use or roll over at regular intervals. You can get better interest rates without the commitment of having all your money tied up for years.

It’s important to know when your CD will reach maturity. You will get a notification roughly three to four weeks before your CD matures, so mark your calendar so you don’t forget. You will be penalized for withdrawing your money at any time outside of the grace period. The penalty fees can be hefty — up to a year’s worth of interest. One exception is a no-penalty CD , which offers the ability to withdraw money early for free. Keep in mind that although this type of CD is more flexible, it usually has lower yields than a traditional CD.

When a CD reaches maturity, it’s time to decide how to handle your funds. Take the time to know when your CD matures and weigh your choices carefully for what you should do with your money next.