When you have a certificate of deposit approaching its maturity date, your bank or credit union can make things very easy on you. Do nothing and they’ll conveniently roll your funds into a new CD. But for the savvy saver, it’s usually a mistake to let them do this.
The CD marketplace is chock full of options from hundreds of institutions, in a wide variety of term lengths, interest rates and special features. And because investing in a new CD requires committing those funds for usually at least a year, and often several years, it’s wise to lock into a good deal.
In contrast, letting a CD mature without any instructions on how to handle the proceeds typically results in the bank rolling the funds into a new CD that’s as similar in length as possible to the maturing CD. So if your original certificate was a 21-month special, they’ll likely move your money into their current 24-month standard CD.
While it’s theoretically possible the standard CD offers a good return, chances are exceptionally high you’ll find a better yield by shopping around. That’s because many top-earning CDs are special odd-month terms or limited-time promotions, not standard issue certificates.
Fortunately, it’s easy to have your CD liquidated instead of auto-renewed. In the weeks before expiration, your financial institution will notify you of the impending maturity date, with instructions for informing them what to do with the funds. Generally, they provide the option to transfer the proceeds to a linked savings account, and from there, you can do what you like with the funds.
The important thing is to submit your liquidation request in time for their deadline, as the grace period is slight. You’ll then have whatever time you need to figure out the next best step for your funds.