When a certificate of deposit matures, your bank gives you a short window — usually seven to ten days — to decide whether to withdraw the money, renew the CD, or move it somewhere else. If you do nothing during that window, most banks automatically roll your balance into a new CD at whatever rate they are currently offering, locking your money up for another full term. That is the short version of what happens when a CD matures. The details below determine whether the outcome works in your favor.
The Grace Period
The moment your CD reaches its maturity date, you enter a grace period. During that window you can withdraw your funds, redirect them, or renew into a different CD without paying an early withdrawal penalty. Grace periods commonly run seven to ten days, though the exact length depends on your bank and the terms of your account. Federal rules require a minimum of five days when the bank uses a shortened notification timeline.1eCFR. 12 CFR 1030.5 – Subsequent Disclosures
One catch surprises many depositors. Banks are not required to pay interest on your funds during the grace period.2eCFR. 12 CFR Part 1030 – Truth in Savings, Regulation DD If you delay your decision, the balance may sit idle earning nothing. Have a plan ready before the grace period starts.
What Happens If You Do Nothing
If the grace period ends without instructions from you, the bank typically rolls your entire balance, principal plus accrued interest, into a new CD with the same term length as the original. The rate on that new CD will be whatever the bank is currently paying, not the rate you had before. Depending on where rates have moved, the renewal could pay you more or considerably less.3Consumer Financial Protection Bureau. What Is a Certificate of Deposit (CD) Rollover or Renewal
Once the automatic renewal takes effect, you are locked in for the new term. If a month later you realize you need the money, or you spot a better rate at another bank, getting out will trigger an early withdrawal penalty.
Leaving a matured CD ignored for years carries a further risk. If the account sits without contact or transactions long enough, the funds may be classified as unclaimed property. Most states require banks to turn over dormant accounts after three to five years of inactivity, at which point the money goes to the state and you have to file a claim to recover it.
The Notice Your Bank Sends Before Maturity
Federal regulations require your bank to alert you before your CD matures, so the maturity date should never come as a surprise. For CDs with terms longer than one year that renew automatically, the bank must deliver a notice at least 30 days before maturity. Alternatively, the bank can send the notice at least 20 days before the end of the grace period, provided that grace period is at least five days long. For CDs longer than one year that do not renew automatically, the bank must notify you at least 10 days before maturity and tell you whether interest will continue to accrue after the term ends.1eCFR. 12 CFR 1030.5 – Subsequent Disclosures
CDs with terms of one year or shorter fall outside these specific federal notice deadlines, though many banks still send a courtesy reminder. Check your original account agreement for the exact timeline you are entitled to.2eCFR. 12 CFR Part 1030 – Truth in Savings, Regulation DD
Your Options at Maturity
You have several choices, and none of them has to be complicated.
- Withdraw everything. Take the full balance, the original deposit plus all earned interest, and use it however you want. The funds can go to your checking or savings account, cover a large expense, or fund another investment.
- Renew at the same bank. Roll the balance into a new CD at the same or a different term length. Compare the bank’s current rates for different terms before deciding.
- Move to a different bank. Transfer the funds to a CD or another account at a competing institution. You will need the receiving bank’s routing number and your new account number to complete an electronic transfer.
- Take a partial withdrawal. Some banks let you pull out a portion and renew the rest into a new CD. Not every institution offers this, so ask first.
- Build a CD ladder. Divide the balance across several CDs with staggered maturity dates, such as one-year, two-year, and three-year terms. As each rung matures, you decide whether to spend the money or reinvest it.
Brokered CDs Work Differently
If you bought your CD through a brokerage firm rather than directly from a bank, the maturity process is not the same. Brokered CDs do not automatically renew. When the term ends, your principal and final interest payment are deposited into the cash position of your brokerage account, and you decide what to do from there.
Brokered CDs also carry features you will not see on traditional bank CDs. They generally pay simple interest at regular intervals rather than compounding inside the CD. Some carry a call feature, which lets the issuing bank redeem the CD before its stated maturity date; you would get your principal and earned interest back but lose the remaining term’s income. Selling a brokered CD before maturity is possible on the secondary market, but the price depends on current interest rates and there is no guarantee of a buyer.4Investor.gov. Brokered CDs
CDs Inside an IRA or Retirement Account
If your CD sits inside an IRA, the maturity event triggers additional rules. The money stays tax-deferred as long as it remains within a qualified retirement account, but how you handle the transition matters.
The safest path is a trustee-to-trustee transfer, where your current institution sends the funds directly to the new one. No taxes are withheld, no 1099 is generated for the transfer, and it does not count toward the IRS one-rollover-per-year limit, because the IRS does not treat a direct transfer as a rollover at all.5Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
If the funds come to you personally instead, you have 60 days to deposit them into another qualified retirement account. Miss that deadline and the IRS treats the distribution as taxable income. If you are under 59½, you will also owe an additional 10 percent tax on the amount you failed to roll over. Your bank will also withhold 10 percent of the distribution when it is paid to you, and if you want to roll over the full amount you will need to make up that withheld portion out of other funds.5Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
Taxes on the Interest
Interest earned on a CD is taxable income in the year it becomes available to you, even if you do not withdraw it. The IRS applies a concept called constructive receipt: once interest is credited to your account or otherwise made available, it counts as income for that tax year.6eCFR. Title 26, Part 1 – Taxable Year for Which Items of Gross Income Included For a CD that matures and automatically renews, the interest credited at maturity is taxable that year regardless of whether you touched the money.
Your bank will send you a Form 1099-INT for any year in which you earned $10 or more in interest. Box 1 reports total taxable interest and Box 2 separately reports any early withdrawal penalty you paid during the year.7Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID Give the bank your correct taxpayer identification number, usually your Social Security number, or the bank may apply backup withholding to your interest.8Internal Revenue Service. Topic No. 403, Interest Received
If you do pay an early withdrawal penalty, you can deduct it as an adjustment to gross income on your federal return. This is an above-the-line deduction, so you do not need to itemize to claim it.9Internal Revenue Service. Penalty on Early Withdrawal of Savings
If the Account Holder Has Died
When a CD owner passes away, the FDIC continues to insure that person’s accounts at the same level for six months after the date of death. This grace period gives surviving family or an executor time to restructure the accounts, whether by retitling them or distributing funds to beneficiaries, without losing insurance coverage.10FDIC.gov. Death of an Account Owner
If the CD was set up as a payable-on-death (POD) account, the named beneficiary can claim the funds directly by contacting the bank and presenting a death certificate. POD accounts bypass probate. The beneficiary can withdraw the balance, have the CD retitled in their own name, or leave the funds in place until maturity.
If no beneficiary was named, the CD becomes part of the deceased person’s estate and is distributed according to the will or, if there is no will, under the state’s intestacy laws. The executor or administrator will need to work with the bank and may need to present letters testamentary or similar court documents.
How to Give Your Bank Instructions
Once you have decided, communicate your choice before the grace period ends. Most banks offer several channels:
- Online banking. Log in and look for a maturity instruction option on your CD account page.
- Phone. Call customer service with your CD account number and process instructions with a representative.
- In person. Visit a branch with a valid ID and your account information.
- Mail. Some banks include a maturity instruction form with the written notice; complete it and mail it back promptly, since the grace period is short.
If you are transferring funds to a different institution, have the receiving bank’s routing number and your new account number ready. For IRA CDs, specify that you want a trustee-to-trustee transfer to avoid withholding. Banks typically process maturity instructions within one to three business days and send a confirmation. Keep that confirmation, especially if you are closing the CD entirely; it is your proof that the account was handled according to your directions.