What to do With a Maturing CD

Make a Plan and Make it Happen

Measuring Piggy
Evaluate your plans and your situation before you do anything. Tim Ellis/Ikon Images/Getty Images

When a certificate of deposit (CD) matures, you’ve got options. So what’s the best thing to do with money that’s newly available from your CD?

You’ve got short window of time – often 10 days or so – to decide what to do and provide instructions to your bank. Doing nothing usually means the CD will renew: you’ll start over with another CD with the same term as before. But that’s not always your best option, and it’s always a good idea to choose what happens to your money instead of letting the bank do it for you.

Time to Evaluate

When your CD comes due, take the opportunity to evaluate your financial goals and your current financial position. How are things going? Do you want to keep cash in a CD, or would it be better to put the money elsewhere? When you originally bought the CD, perhaps it made perfect sense, but several years may have passed since then – and a lot can change in that amount of time. If you end up putting the money into another CD (or simply allow your bank to do it for you), make sure it’s a conscious decision – not a default option.

Evaluating your finances also helps you avoid treating your CD like money you found in an old pair of jeans. It’s tempting to splurge with “found” money, but you might really need to save that cash. Remember why you bought the CD in the first place. Perhaps it was for a down payment, your next car, or a safety net for life’s surprises.

You don’t have to make a decision right away.

If you need time to evaluate, move the money into a savings account temporarily. Just don’t forget about it.

Keeping it Safe

If you decide that you want to keep that money safe (in other words, you’re happy earning a little bit of interest in a government-insured bank account), look at all the options.

Shop around: your current bank had great CD rates when you bought your CD, but other banks might be more competitive now. See how much more you can earn by switching banks, but don’t jump ship unless it’s really worth it (calculate how many more dollars per year you’ll earn). Be sure to include credit unions in your search. Changing banks takes time and energy, and your money might not earn any interest while moving between banks, so sometimes switching is simply not worth it.

Go liquid? Your money has been locked up for a long time, and now it’s free. If you like how that feels, consider using a liquid CD that allows penalty-free withdrawals (more or less) any time. The tradeoff is that you’ll earn less interest, but that might be a price you’re willing to pay if you really need liquidity.

Money market accounts: CDs pay more than savings accounts, but they don’t always pay much more. If you like the idea of flexibility, look into money market accounts, which often pay almost as much as CDs – but allow you to access your cash. Money market accounts aren’t as liquid as checking accounts, but the money is available in “chunks.”

Form a strategy: decide how you want to invest your money. Do you want to put it all into one CD, or would you enjoy having some of your money mature every six months or so?

A CD ladder can make that a happen for you. If you think interest rates are going to rise or fall (or if you think you’ll need the money at some point), you’ll want to choose your maturities carefully.

Pay Off Debt

Another option is to use the money to pay off loans. Look at how much you pay in interest compared to the interest you’ll earn from another CD. If you’ve got toxic loans like high-interest credit card debt, you might be better off eliminating the debt (and cutting up those cars).

Before you take that route, make sure you can do without the money. That cash from your CD offers security, and you can use it to make high-priority payments (such as your mortgage, auto expenses, and healthcare costs). Throwing it all at your debt means you’ll have less to fall back on – but you might also get rid of a few monthly payments, which can help you build up your savings again.

It’s always good to have some emergency cash on hand. If you want to reduce your debts, that’s a great idea. Just decide how much (if any) to keep in savings for any surprises.

Longer Term Investments

If you’ve got plenty of cash available and no debt, you might want to use different types of investments for longer-term goals (like retirement).