What happens to a forgotten CD?

By Sabrina Karl

Though some might find it hard to imagine, money socked away in CDs occasionally falls off the radar. Off the saver’s radar, that is. But banks don’t forget, and though you won’t lose your money, you may not be able to claim it as easily as you’d like.

When a certificate’s maturity date is soon approaching, your bank will remind you of the upcoming date, along with instructions for specifying what you want done with the funds. But if you neglect to provide instructions, most institutions will roll the money into a new CD of the same term. So if your maturing certificate had a five-year term, the bank will move the funds into a new five-year CD.

If you miss your maturity date, because you left mail unopened or you changed address and didn’t receive the notice, there is usually a 10-day grace period during which you can still direct the funds. But if it’s been months or years, you’ll have to contact the bank to inquire where they moved your money.

The good news is that the funds are still yours. But once they’ve been rolled into a new CD, you face two disadvantages. First, the interest rate on the new CD is not likely to be competitive, so you’ve given up your chance to earn more with a better certificate. Second, you’ll be forced to either wait until the new CD matures, or pay an early withdrawal penalty. These penalties vary widely across banks, but can be steep.

Claiming a forgotten CD isn’t complicated, but you’ll almost certainly reduce your earnings by having neglected to act at maturity. So avoid penalties and lost earnings by putting maturity dates on your calendar, opening all financial mail promptly, and keeping your address up to date with financial institutions.