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While the economic environment has been shifting, certificate of deposit (CD) accounts continue to be a valuable savings option right now, one with a relatively high annual percentage yield (APY) in the current rate environment. Part of the draw, especially in today’s changing interest rate environment, is that CD account interest rates are typically fixed throughout the CD term, meaning that they won’t change, which can help you grow and protect your money.
In turn, you can use CD accounts to help grow your funds over time. But the major drawback is that the money you deposit is typically inaccessible until the CD’s maturity date — unless you want to pay for an early withdrawal fee to access it. And that can eat into the returns you earn with this type of account, so it’s typically not the best route to take. So, savers who use CDs generally need to keep a close eye on their maturity dates to ensure that they’re optimizing their returns. After maturity, they can allow the account to roll over, reallocate funds into another CD or savings vehicle or cash out for their intended purchase.
If you’re not keeping track, though, you run the risk of missing the CD maturity date, and your CD could renew without you realizing it. If that’s happened to you, here’s what banking and credit union experts say you should do once you have missed your CD maturity window.
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Missed your CD’s maturity date? Do these 6 things now, experts say
A CD account can be a powerful tool to preserve your principal and earn more on your deposits. But if you miss the CD maturity date, it could be costly.
“If you miss the maturity window, the CD would renew for a fixed period of time, which could cause issues if you need access to liquidity. If you do need to access your funds in the event of an emergency, you will most likely be charged a penalty fee,” says Chris Keller, chief marketing officer at Empower Federal Credit Union.
Not only that, but your CD could renew automatically at a lower rate or with less favorable terms, but there are steps you can take to try and remedy the issue, including the following:
Contact your financial institution
If you’ve missed your CD maturity date, you don’t need to simply accept it. Start by taking action and assessing the situation.
“The first thing they should do is contact their bank. Most CDs have a seven- to 10-day grace period, as soon as that maturity date hits, so if they just missed it, they’re probably still within their grace period and can make adjustments to the CD,” says Karin Cook, vice president of client deposit services with Merchants Bank.
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Review the account’s grace period
The next step is to check if your financial institution has a grace period. If so, review how long it is to see if you’re still within the window.
“There are no fees or penalties when making changes during the grace period. However, not all financial institutions have grace periods,” says Keller.
And, it can still be worthwhile to check in with your banking institution, even if the grace period is over.
“If you’re outside of your grace period, still go ahead and reach out to your bank. Depending on your relationship with them, they may be willing to reduce the amount of the penalty that you have to pay to withdraw the funds, or waive it altogether,” says Cook.
Having a well-established relationship with the bank or credit union can make a difference in this situation.
“I know from our experience that having a full relationship with the institution can make such a big difference. As a rate shopper, if all you have is that certificate, the institution may not be as likely to waive any penalties. Where, if you have a full relationship with the institution, that’s a whole different scenario, because we don’t want to lose you, and that long-term relationship that you have, and all the products and services that you use,” says Carma Peters, president and CEO at Michigan Legacy Credit Union.
Check the CD interest rate, term and penalties
If you missed the CD maturity window, your CD may have been automatically renewed already. If it has, be sure to check the new CD interest rate, the term length (so you know when the CD term ends) and verify the early withdrawal penalties tied to the account. That can help you decide whether to leave the money in the account or take action.
If you’re within the grace period and can make changes, compare CD rates at your financial institution and others. If you find something more competitive elsewhere, it’s worth it to have a conversation with your current financial institution.
“We have negotiated to match [rates] to keep funds in our institution,” says Peters.
Decide what’s next
After you’ve compared CD account rates and CD terms, you’ll be more prepared to decide what’s next. Your options include:
- Withdrawing the funds from your CD account
- Renew the CD term
- Reinvest the funds in a different CD account or financial product
Whether you’re within your grace period or not, and how much your early withdrawal penalty is, may also impact your decision.
Set calendar reminders
If you’ve missed the CD maturity date and you’re beyond your grace period, you may have to pay an early withdrawal penalty if you want to access your funds. To help avoid this issue in the future, create calendar reminders ahead of the current CD’s maturity date to remind you.
“Keep a spreadsheet with your CD maturity schedule and set calendar reminders to prevent you from forgetting the maturity date. Reach out to your financial institution ahead of time, so you can discuss your options before your funds are locked in at a new rate,” says Keller.
Review contact information
The next thing you want to do is review that your contact information is up-to-date. Check your email and address, as financial institutions use that information to send you important information about your CD account and other matters.
“We do send out notifications prior as a reminder, so make sure you check the mail and read your emails from your financial institutions,” says Peters.
The bottom line
When your CD matures, you can finally access the funds you’ve put away. You can decide whether you want to renew your CD, reinvest in another CD term or product or withdraw the cash to use. It’s important to keep track of when your CD matures, though, because if you don’t take any action, your CD may renew automatically. That could mean being stuck with a CD term and certificate of deposit interest rates that you don’t want. Or worse, they are less favorable in the existing environment, especially with the current CD rate predictions.
Trying to remedy the issue after your grace period will likely mean an early withdrawal penalty, which cuts into your savings. So, make sure your contact information is current, you read your emails and mail from your financial institution and you set up calendar reminders for your CD maturity date to avoid costly delays.
