To close a CD account without paying a penalty, contact your bank during the short grace period that opens on the maturity date, tell them where to send the money, and get written confirmation that the account is closed. Closing before maturity works the same way mechanically, but the bank will deduct an early withdrawal penalty that typically runs from 90 days to 12 months of interest depending on the term length. Brokered CDs purchased through an investment firm follow a different process entirely.
Closing a CD at Maturity
The maturity date is the only moment you can take your money out at no cost. After that date, the bank opens a grace period, usually 7 to 10 days at large institutions, during which you can withdraw the funds, move them to another account, or roll them into a new CD on your terms. Federal regulations require banks to disclose whether a grace period exists and how long it lasts; the minimum under one alternative disclosure timeline is five calendar days.1eCFR. 12 CFR Part 1030 – Truth in Savings (Regulation DD)
Miss the grace period and most CDs auto-renew for another term at whatever rate the bank is currently offering, which may be lower than the rate you had. Banks are required to mail a maturity notice at least 30 calendar days before an automatically renewing CD expires, or at least 20 days before the grace period ends.2eCFR. 12 CFR 1030.5 – Subsequent Disclosures Set your own reminder a week ahead. The bank’s notice can arrive late or get lost, and a missed grace period locks the money up again.
How to Submit the Closure
Most banks accept closure requests through the same channels you use for everyday account management. The right one depends on how fast you need confirmation and whether the CD is matured or being broken early.
Online or Mobile Banking
If your bank offers CD management online, closing a matured CD is often a few clicks: find the CD, choose to withdraw or transfer the balance out, and pick the destination account. Digital closures create a timestamped record, which helps if any question later arises about whether you acted inside the grace period. Not every bank allows early withdrawals through the website, though. Some reserve that for a phone call or branch visit.
By Phone or in Person
Calling the bank’s service line works for both matured and early closures. Have your account number and ID information ready. A branch visit is slower but gives you immediate confirmation and is often the better route when the CD is held jointly or inside a trust, where the bank may need to verify additional documents before releasing funds.
Written Request
Some banks still accept, and a few require, a written closure letter for certain account types. Include your full name, account number, and clear instructions on where to send the balance. Send it certified so you have proof of delivery. Mail eats days you may not have during a narrow grace period, so this is usually the backup, not the first choice.
What You’ll Need
Banks verify your identity before releasing CD funds. A government-issued photo ID is the baseline. For joint accounts, both holders may need to authorize the closure depending on the bank’s policies. Your original Truth in Savings disclosure, provided when you opened the CD, spells out the maturity date, penalty formula, and renewal terms,3Consumer Financial Protection Bureau. 12 CFR Part 1030 (Regulation DD) – 1030.4 Account Disclosures though the bank can pull the same information if you don’t have it.
Closing a CD held by someone who has died takes more paperwork. The executor or administrator typically needs a certified death certificate along with letters testamentary or letters of administration from the probate court. Call the bank first; each one handles estate accounts a little differently.
What Early Withdrawal Costs
If you break the CD before maturity, the bank deducts a penalty from the balance. Federal law sets only a floor: a withdrawal within the first six days after deposit must cost at least seven days’ simple interest.4Office of the Comptroller of the Currency. What Are the Penalties for Withdrawing Money Early From a CD There is no federal ceiling, so each bank sets its own schedule, laid out in the disclosure you received at account opening.3Consumer Financial Protection Bureau. 12 CFR Part 1030 (Regulation DD) – 1030.4 Account Disclosures
Common penalty ranges run along these lines:
- CDs of one year or less: around 90 days of simple interest on the amount withdrawn.
- CDs longer than one year but under five years: around 180 days of simple interest.
- Five-year CDs and longer: 12 months of simple interest or more.
These are typical, not universal. Some banks assess the penalty on the full principal regardless of how much you withdraw; others apply it only to the amount taken out. The formula in your account agreement is what controls.
The part that surprises people: if the CD hasn’t yet earned enough interest to absorb the penalty, the bank takes the shortfall from your principal. On a CD opened recently and broken soon after, you can walk away with less than you deposited.
Partial Withdrawals
Some banks allow partial withdrawals and calculate the penalty only on the piece you take out. Others require you to close the entire CD. Check the account agreement before assuming either applies.
CDs Inside an IRA
A CD held inside a traditional IRA can trigger two separate penalties on early withdrawal. The bank still charges its own CD penalty. If you’re under 59½ and pull the money out of the IRA, the IRS adds a 10% tax on the distribution, and you owe ordinary income tax on the withdrawn amount as well.5Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions Qualifying for an IRS exception doesn’t erase the bank’s penalty; they are separate charges from separate institutions.
Brokered CDs
If you bought the CD through a brokerage rather than directly from a bank, it doesn’t close the same way. Most brokered CDs have no early redemption option with the issuing bank. To get out before maturity, you sell the CD on a secondary market through your brokerage account, and the price depends on where interest rates have moved. There is also no guarantee a buyer will be available at the moment you want to sell. Held to maturity, a brokered CD pays face value plus remaining interest, the same as any other CD.
No-Penalty CDs
A few banks offer no-penalty CDs that allow a full-balance withdrawal after a short initial funding window, usually around six days, at no cost. The rate is typically lower than a traditional CD of the same term. A standard CD cannot be converted into one after the fact.
Taxes on the Interest and the Penalty
Your bank reports interest credited to the CD during the calendar year on Form 1099-INT, and you owe income tax on that interest in the year it is credited, whether the CD has matured or not.
The early withdrawal penalty is deductible. It appears in Box 2 of the 1099-INT and is claimed as an adjustment to income on Schedule 1 of Form 1040, Line 18.6Internal Revenue Service. Penalties for Early Withdrawal This is an above-the-line deduction under 26 U.S.C. § 62, so it reduces taxable income whether you itemize or take the standard deduction.7Office of the Law Revision Counsel. 26 USC 62 – Adjusted Gross Income Defined A $200 penalty cuts $200 off your taxable income.
Keep the final account statement. It documents the interest earned and the penalty assessed, both of which you’ll need at tax time.
Getting Your Money and Confirming the Account Is Closed
Once the closure processes, the remaining balance moves to wherever you directed it. A transfer into a checking or savings account at the same bank is the fastest, usually settling within one business day. ACH transfers to an external bank generally take one to three business days, though same-day ACH is increasingly available. If you have no linked account, the bank may mail a cashier’s check, which can take seven to ten business days and may carry a small fee.
After the funds arrive, confirm the CD shows a zero balance and a closed status. If the CD was set to auto-renew and the bank hasn’t formally closed it, any leftover balance can roll into a new term. Pull up the account online or request written confirmation that the closure is complete.1eCFR. 12 CFR Part 1030 – Truth in Savings (Regulation DD)