A Guide to Pre-CD Expiration Strategies

What Is a CD?

A Certificate of Deposit offers a fixed income opportunity where you agree not to withdraw your funds for a specific term. In return, the bank provides a slightly higher fixed interest rate than a regular savings account.

With CDs, banks can lend out deposited funds and earn interest, knowing the duration they can utilize those funds. Early withdrawal penalties apply if you take out your money before the term ends, including if the CD rolls over into a new term.

It’s essential to understand whether your CD is set for auto-renewal to plan accordingly and consider your need for access to the funds during the term.

What Do I Do With a Rollover CD When It Matures?

When a rollover CD matures, the bank automatically initiates a new term with your funds and accrued interest. However, you have options during the grace period provided by most CDs:

1. Auto-renew into a new term, potentially at a lower interest rate
2. Receive a check for your total balance
3. Keep your funds in an account with or without interest temporarily

The Potential Consequences for Missing Your Grace Period

It’s important to keep track of your CD maturity date to avoid unintended consequences. Setting reminders and staying informed about your CD status can prevent scenarios like missing the grace period and ending up with lower interest rates.

Being proactive can help you avoid unfavorable outcomes, such as a significant drop in interest rates on your rollover CD.

Final Thoughts

Before investing in a rollover CD, plan ahead for its maturity date and potential outcomes. Setting reminders for yourself can prevent unexpected renewals with lower interest rates. Stay informed and be prepared to take action to make the most of your investment.