Is your CD maturing soon? Here are the dos and don'ts to know
Certificate of deposit (CD) accounts have been a good bet for savers in recent years.
Thanks to a combination of inflation and boosts to interest rates to combat it, savers have seen rates on CD accounts rise exponentially. Now, finding an account offering 5% or more in various terms is not difficult. If you're one of those savers who have been able to take advantage of this opportunity, however, you may be wondering about your next steps. After all, CDs by their nature, won't remain the same forever and rates and terms can change upon the CD's maturity.
Understanding this, savers should prepare now – before the CD term matures – so that they're best positioned to earn even higher returns with their next account. To effectively do so, savers should understand some important dos and don'ts.
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3 things to do before your CD matures
Here are three important steps to take before your CD hits its maturity date:
Start shopping around
The rate climate may have changed significantly since you first opened your CD so start shopping around now to see what other options are available. You may be able to find an account with a higher rate, better terms and few or no fees. But you'll need to do this in advance so you're ready to move your funds when the account has matured.
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Contact your lender
You'll typically have a small window in which you can access your funds after the CD has matured. So make sure to contact your lender now – in advance – so you know what your options are for that time frame. Ask how long you have to access the money, if there are any fees or penalties for doing so and what will happen if you leave the funds untouched. By knowing your options and limitations, you'll be able to build the best-informed plan.
Have a plan
There aren't many savings account options as beneficial as CDs right now, so you want to avoid losing this opportunity. But you also want to be able to capitalize on today's rate climate for as long as possible. And you can only do both by having a well-thought-out and ready-to-go plan. So do your research, understand your financial goals (long-term and short-term), speak to your lender and develop a plan for the next steps.
3 things to avoid before your CD matures
Here are three important moves you may want to avoid as your CD term comes to an end:
Letting it automatically rollover
You don't necessarily need to make any moves if your CD is set to mature. Most lenders will just let it automatically roll over into a new CD. But that could be a mistake if it's set to rollover into an account with a lower rate and less favorable terms. So don't let your account roll over into a new one without first checking to see if the new one is as advantageous as other readily available options.
Keeping the same rate
While you may have opened your CD with what was a high rate at that time, you may be able to secure a significantly higher one now. So don't be content with what you had three, six or 12 months ago. You may easily be able to find an account with a better rate now, possibly even with the same lender, making the switch between accounts a seamless transition.
Putting it back in a regular account
Traditional savings accounts come with an average rate of just 0.45% right now. So it would be a mistake to put your funds back into one of those accounts post-CD maturity. Instead, consider opening a new CD with a potentially even higher rate right now. Or move some (or all) of those funds into a high-yield savings account, instead. Just avoid putting your money back into a traditional account where it won't even keep pace with inflation.
The bottom line
With inflation persistent and interest rates elevated, now is still a great time to keep your money in CDs or open new ones. If you have a CD set to mature soon, however, it's important to start shopping around to review alternatives, contact your lender to clearly understand the next steps and prepare a plan for post-CD maturity. It's also critical to avoid some simple but easy-to-make mistakes like letting it automatically roll over, keeping the same rate you opened the account with and taking it out to put it back in a regular account. By understanding these dos and don'ts now savers will be best positioned to earn high returns on their CD accounts now and long into the future.
