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Understanding CD renewal: Should you roll over a maturing CD?
When your certificate of deposit (CD) matures, you have several options for what to do next.
If you want the money back, you can withdraw it or transfer it to a bank account. However, if you don't need the funds in the short term, you can roll over or "renew" your CD, meaning you put the money directly into a new CD.
Most banks will automatically renew your CD within 10 days after it matures, unless you specifically tell them not to. Just keep in mind that when they do this, you might have a lower interest rate than you did on the original CD.
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What does it mean to renew (roll over) a CD?
When it comes to CDs, rolling over or renewing means you take money from a matured CD and put it directly into a new one with the same bank at the same term.
If your CD matures, and you don't do anything with the money, the bank will likely renew your CD automatically. Here are a few things you need to know about automatic CD renewal:
The interest rate on the new CD will likely be lower if overall CD rates have dropped.
Your new CD rate will be locked in on the date your old CD matures.
Your new account will usually have the same CD term, meaning the same length of time to maturity.
Early withdrawal penalties will apply to the new CD.
If the bank does not automatically renew your CD, you can choose to renew it manually.
When you go this route, make sure to start by reviewing the CDs and rates that are currently available. Then you can follow the bank's instructions to choose a CD and the amount you want to deposit.
Understanding CD renewal grace periods
For anyone who wants to invest in a CD, it's crucial to be aware of the CD grace period. This is the period of time between when a CD matures and when the bank automatically rolls the money into a new CD (usually, seven to 10 calendar days — not business days).
During the grace period, you no longer have to worry about early withdrawal penalties, so you can withdraw or transfer your full deposit without fees. Here are all of your options during the grace period:
Close the CD and withdraw or transfer all of the money
Withdraw a portion of the money and let the rest roll over
Add more money to your CD
Move your money to a different CD
Since grace periods are fairly short, we recommend marking your CD maturity date on your calendar, so you don't miss your opportunity to move your money.
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What if I don't want to renew my CD?
If you don't want to renew your CD, you can either move your money during the grace period or inform the bank of your preference in advance before the CD matures.
Depending on the bank, your window of time to submit an advance request could be anywhere from 30 days to a year before your CD matures.
Just know that some banks make it less-than-convenient to make a withdrawal from your CD at maturity. For example, with TD Bank, you have to visit a bank branch to make a withdrawal. If you bank with Ally, they'll send you a check. Alternatively, you can transfer the money to another bank account.
Alternatives to renewing a CD
It's easy to let the bank automatically renew your CD, since no action is usually required. But it might not be the best move. Here are some alternatives that could better fit your financial situation:
Withdraw the money: If you want to use the funds for a specific financial goal, such as paying off high-interest debt or saving more for retirement, you can withdraw the funds.
Transfer it to a bank account: If you need the money for day-to-day spending, transfer it to a checking account. If you don't need it in the next few months, consider moving it to an account that earns more interest, like a high-yield savings account (HYSA).
Move it to a better CD: Before renewing, you should always check out the CD market and see if better rates are available. To capitalize on the best CD rates at the moment, you might have to move your money to a different bank.
Read more: How to switch banks: An easy step-by-step guide
CD renewal FAQs
Will my bank automatically renew my CDs?
Most banks automatically renew CDs, but you can look at your account agreement to find out for sure. You usually receive this document when you open a CD, but if you don't have it handy, check the "Legal Agreements" or "Statements & Documents" section in your online banking account.
How can I find my CD maturity date?
You can usually find your CD maturity date by logging into your CD account and looking at the account details or account summary page. Some banks will also send you a notification at least 30 days before your CD matures.
Can I avoid taxes by renewing my CD?
Renewing a CD won't help you avoid taxes on CD interest. Generally, if your account earns more than $10 in interest in a year, you have to report the earnings as income to the IRS via a 1099-INT form.
