When you cash out a CD at maturity, you can take the full balance (your original deposit plus all earned interest) without any early withdrawal penalty, but only if you act inside the grace period your bank provides. That window starts on the maturity date and lasts at least five calendar days under federal rules, though many banks give seven, ten, or more. Miss it, and the bank will almost certainly roll your money into a new CD at whatever rate it happens to be offering that day.
The Grace Period and Your Maturity Notice
Your bank is required to warn you before maturity. For CDs longer than one year that renew automatically, the bank must send a disclosure at least 30 calendar days before the maturity date. It can also send the notice at least 20 days before the grace period ends, as long as that grace period is at least five calendar days.1eCFR. 12 CFR 1030.5 – Subsequent Disclosures The notice will show the maturity date, the new interest rate and APY if known, and any changes in terms for a renewed CD.
Federal regulation sets the grace period floor at five calendar days. Many banks voluntarily extend it. Your account agreement or the maturity notice itself will spell out the exact window. During those days you can withdraw the money, move it elsewhere, or let it renew, all without penalty.
Mark the maturity date on your calendar and set a reminder a few days before. The window is shorter than most people expect.
Your Options at Maturity
Three basic choices, and the right one depends on whether you need the cash, want to keep earning interest, or plan to move the money elsewhere.
- Cash out entirely. Send the full balance to your checking or savings account, or request a check. You get immediate access to the funds.
- Renew into a new CD. Roll everything into a fresh CD at your bank’s current rate. Some savers withdraw just the accumulated interest and renew only the principal, which gives them some spending money while the core deposit keeps growing.
- Transfer to another institution. Move the funds to a different bank or investment account, often to chase a better rate.
If you renew, check the new rate carefully. Banks set renewal rates from whatever they’re currently offering, which can be substantially higher or lower than what you earned on the original CD.2Consumer Financial Protection Bureau. What Is a Certificate of Deposit (CD) Rollover or Renewal In a falling-rate environment, this is where people get caught.
How To Actually Withdraw the Money
The mechanics are straightforward, though they vary by bank.
- Online or mobile banking. Most banks let you close a matured CD and transfer the balance to a linked account through their website or app. Look for a “withdraw” or “close account” option on the CD’s detail page. Transfers to another account at the same bank are usually instant.
- By phone. Call customer service, verify your identity, and request a full withdrawal. You’ll say where the funds should go.
- In person. Bring a valid photo ID to a branch. You can move the balance to another account or walk out with a cashier’s check.
Moving money to a different bank means you’ll need that bank’s routing number and your account number there. ACH transfers can clear the same business day or take up to two business days.3Nacha. The ABCs of ACH A mailed check typically takes five to ten business days. Either way, keep a confirmation number or receipt.
What Happens if You Do Nothing
Ignore the notice and let the grace period expire, and your bank will almost certainly sweep the full balance (principal plus interest) into a new CD, usually with the same term as the original but at the bank’s current interest rate.2Consumer Financial Protection Bureau. What Is a Certificate of Deposit (CD) Rollover or Renewal4HelpWithMyBank.gov. My Certificate of Deposit (CD) Matured, but I Didn’t Redeem It. What Happened to My Funds
Once the new CD takes effect, you’re locked in again. Want the money out? You’ll pay an early withdrawal penalty. The federal minimum is seven days’ simple interest for withdrawals within the first six days after deposit,5HelpWithMyBank.gov. What Are the Penalties for Withdrawing Money Early From a Certificate of Deposit (CD) but most banks charge much more. Penalties commonly run from 60 days of interest on a one-year CD to 150 days or more on a five-year CD, and some banks charge steeper amounts still.6Ally. CD Early Withdrawal Penalty: What You Should Know Real money, lost to a missed deadline.
Taxes on the Interest You Cashed Out
CD interest is taxable as ordinary income in the year you earn it or are entitled to receive it, not necessarily the year you cash out. For CDs that pay interest at regular intervals or mature within one year, you report the interest in the year it’s credited to your account.7Internal Revenue Service. Publication 550 – Investment Income and Expenses Multi-year CDs that defer all interest to maturity may fall under the original issue discount rules, which can require reporting a portion of the interest each year even though you haven’t been paid yet.
The IRS calls this “constructive receipt”: if income is credited to your account or made available without restriction, you owe tax on it whether or not you’ve actually pulled the cash out.8Internal Revenue Service. Publication 538 – Accounting Periods and Methods Leaving the money in the account past December 31 doesn’t defer the tax.
Your bank will send you a Form 1099-INT for any year in which it paid you $10 or more in interest.9Internal Revenue Service. About Form 1099-INT, Interest Income Even if the interest was too small to generate a 1099-INT, you’re still required to report it.
If Your CD Is Inside an IRA
An IRA CD follows all the maturity and renewal mechanics above, but cashing out has a different tax consequence. Withdrawing funds from a traditional IRA triggers income tax on the full amount, and if you’re younger than 59½ you’ll typically owe an additional 10% penalty on top.10Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts The CD’s maturity ends the bank’s lock-in, not the IRS’s.
To move a maturing IRA CD to another bank or investment without triggering taxes, you have two paths. The cleanest is a trustee-to-trustee transfer, where your current bank sends the funds directly to the new institution. That isn’t treated as a distribution, so nothing is withheld and the one-rollover-per-year limit doesn’t apply.11Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
The other path is an indirect rollover: you take the distribution yourself and deposit it into another IRA within 60 days. That one is riskier. Your bank will withhold 10% for federal taxes, and you have to deposit the full original amount (including making up the withheld portion from other funds) into the new IRA within 60 days to avoid tax on the difference. You’re also limited to one indirect rollover across all your IRAs per 12-month period.11Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions Miss the deadline or exceed the limit and the whole amount becomes taxable income, potentially with the 10% early distribution penalty on top.
If You Bought Your CD Through a Brokerage
Brokered CDs work differently at maturity. Principal and any final interest payment are deposited straight into your brokerage cash account.12Fidelity. Certificates of Deposit (CDs) No grace period decision, and typically no automatic renewal. The money just becomes available cash.
Some brokerages offer auto-roll programs that reinvest maturing CD principal into a new CD. If you don’t want that, turn the feature off before maturity. Note that brokered CDs generally don’t carry the early withdrawal penalties bank CDs do; instead, exiting early means selling on the secondary market at whatever price current rates and demand support.13Charles Schwab. Bank CDs vs. Brokered CDs: What’s the Difference At maturity, though, you receive full face value regardless of market conditions.
One Thing To Watch if the Balance Is Large
Moving a big CD balance to a new bank? Keep FDIC insurance in mind. Standard coverage is $250,000 per depositor, per FDIC-insured bank, per ownership category.14Federal Deposit Insurance Corporation. Understanding Deposit Insurance A CD that has grown past that threshold through accumulated interest could have a small uninsured slice if your other accounts at the same bank sit in the same ownership category. Splitting funds across banks or ownership categories keeps everything covered.