What to do when your CD matures, according to experts
Consumers have a lot of options these days if they want to save cash — and grow their money while they do. Interest rates on traditional savings accounts have risen quite a bit over the last few years, and rates on high-yield savings accounts and certificates of deposit (CDs) are even higher.
The latter have grown particularly popular, as they allow you to lock in those higher rates for a longer period of time — sometimes up to 10 years, even.
With CDs, you choose your term, and as long as you leave the money in your account untouched for that period, you'll get guaranteed returns once it reaches maturity. At that point, the money is yours to use as you see fit. But should you take it and run or put that cash elsewhere? Below, we'll break down what experts recommend doing once a CD matures.
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What to do when your CD matures, according to experts
Here are five things you can do when your CD matures, according to the experts we spoke to.
Let it roll over into a new CD
One option once your CD matures is to do nothing — and it will roll often (but not always) roll over into a new CD with the same term automatically. To decide if this is the right move for your money, you'll need to think about the timeline of the CD you'd be rolling in to as well as the interest rate your bank is currently offering on that term.
"If the bank that holds your CD doesn't have a good CD to reinvest in, then you may want to cash it out and look for a CD at another bank," says Elizabeth Buffardi, a certified financial planner at Crescendo Financial Planners in Chicago.
You typically have a short window (seven to 10 days from maturity, in most cases) before the rollover is complete, so it's important to make your decision quickly.
See how much more you could be earning with a top CD here now.
Put the funds into a CD with a new term
As Buffardi mentioned, cashing out your old CD and putting them into a new CD — or several of them — is an option, too, and you might want to do this if you need a different term, want to invest only a portion of your funds, or are looking for a better rate than what your current bank is offering.
According to Michelle Kruger, a certified financial planner with Gratus Capital in Atlanta, you should only consider reinvesting in a new CD "if you have a relatively clear timeline for when you will need the funds." Without a clear timeline, you could find yourself pulling out money early, which would subject you to hefty early withdrawal penalties.
"The early withdrawal penalty can result in a significant amount of forfeited interest," she says. "So it's important to know when you will need to access the funds." Sometimes, you may want to split your money into several CDs with different terms — a strategy called CD laddering — if you have financial goals with varied timelines.
Put the money in a high-yield savings account
CD terms are limited, and there isn't one for every timeline out there. So, in some cases, you may be better served by pulling out your cash and depositing it in a high-yield savings account instead. This would give you easy, penalty-free access to the money at any point, while still earning you a solid amount of interest.
"If you need your cash for a specific goal within a shorter time frame than the available CD terms, consider keeping the funds in a more flexible investment," Kruger says. High-yield savings accounts are a smart option, she says, as are money market accounts.
Learn more about your high-yield savings account options here.
Use the cash for other investments
If you want a shot at growing your money even more, you might think about putting it in other investments — like stocks or real estate. This would come with more risk, but it would also offer a chance of higher returns.
"For long-term goals you may be better off investing this money, so it has the potential to grow more for you," says Kendall Meade, certified financial planner at SoFi. "The amount of income you can expect to make from your investments will depend on how it is invested."
Just keep in mind, she says, these investments will fluctuate often based on market conditions, so be prepared for occasional dips.
Use the cash for a major purchase
Lastly, you can cash out your CD and put the funds toward a big-ticket purchase you've been planning — a down payment on a house, a new car or new furniture, perhaps.
"It may be smart to take the money out in cash if you have a purchase to make that you would otherwise be financing," says Brittany Pederson, director of deposit and payment operations at Georgia's Own Credit Union. "The interest rates on credit cards and auto loans are generally higher than CDs, so it may be better to use the funds for those purchases versus paying the interest rate on a credit card balance or auto loan."
For the same reason, you could also use the cash to pay down debts and credit cards, if you have them. Depending on your balances, this could save you significantly on long-term interest.
Shop around for your CD
If you decide to reinvest your cash into another CD, make sure you compare banks and credit unions first. Not only do different institutions offer different terms, but interest rates can vary widely, too. You should also compare banks on early withdrawal penalties, which can cost you quite a bit should you need to withdraw money before the maturity date.
