What to do With a Maturing CD: Decide What's Next

Make a Plan and Make it Happen

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

You have a brief window—often ten days or so—to decide what to do and provide instructions to your bank. Doing nothing usually means the CD will renew: You start over with another CD that has the same term as before. But that’s not necessarily your best option, and it’s always best to proactively 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 during that time. If you end up reinvesting 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 proceeds like money you found in an old pair of jeans. According to the “House Money effect,” people are tempted to splurge with “found” money. But you might need to put that cash toward specific goals. 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 decide right away. If you need time to evaluate, move the money over to your savings account while you do so. You can reinvest in a CD if and when you’re ready. Unless your bank provides an incentive for renewing automatically, a temporary pause may not affect your finances.

Keeping it Safe

If you decide that you want to keep your money safe, evaluate all the options. Several types of government-insured bank accounts provide security and a small amount of interest income.

Shop around: Your current bank may have had great CD rates when you bought your CD, but other banks could 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, if switching is tempting. Be sure to include credit unions in your search. Changing banks takes time and energy, and your money might not generate any interest while moving between banks, so sometimes switching is 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 earn less interest when you opt for freedom, but that might be a price you’re willing to pay.

Money market accounts: CDs pay more than savings accounts, but they might not pay significantly more. If you value flexibility, try 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.” For example, you might receive a checkbook or debit card for occasional spending.

Form a strategy: Decide how you want to invest your money. Do you want to put it all into one CD, or would you prefer to see some of your money become available every six months or so? A CD ladder can make that a happen for you. That strategy may be helpful if you think interest rates are going to move (or if you could potentially need the money at an unexpected time).

Pay Off Debt?

Another option is to use the money to pay off loans. Evaluate how much you pay in interest compared to the interest you earn on CDs. If you have toxic loans like high interest rate credit card debt, you might be better off eliminating the debt (and cutting up those cards).

Before you pay off a chunk of debt, make sure you can do without the money. Cash provides security, and you can use it to make high-priority payments (such as your mortgage, auto expenses, and healthcare costs). Paying down debt means you have less to fall back on. At the same time, you can potentially eliminate a few monthly payments, which frees up cash flow to build up your savings again. Plus, you can minimize interest costs.

It’s always wise to have emergency cash available in a bank account. 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. Doing so can potentially help you avoid taking on debt when something happens.

Longer Term Investments

If you have plenty of cash available and no debt, you may want to use different types of investments for longer-term goals (like retirement). CDs are safe, and that may be exactly what you need. But if you have a long time horizon and the ability to take more risk, a diversified portfolio could be appropriate. Ask a financial planner for advice on how to save for your goals.