When a certificate of deposit matures, the bank unlocks your money and opens a short grace period, usually seven to ten days, during which you can withdraw the funds, move them, or change the terms without paying a penalty. If you don’t act within that window, most banks automatically roll your entire balance, principal and interest, into a new CD at whatever rate they’re currently offering for the same term length. That is the default outcome, and it is where most of the money quietly gets lost to worse rates.
The Grace Period Is Your Only Penalty-Free Window
The grace period starts on the maturity date itself. Its length is set by your account agreement rather than a single federal rule, but seven to ten calendar days is typical. Regulation DD defines the grace period as the time after maturity during which you can withdraw funds without a penalty, and it requires the bank to disclose the length when you first open the account.1eCFR. 12 CFR Part 1030 — Truth in Savings (Regulation DD)
Whether the money keeps earning interest during those days depends on the bank. Some continue paying at the old CD rate, some drop to a lower passbook rate, and some pay nothing at all. The account agreement spells this out, and the maturity notice should reference it.2HelpWithMyBank.gov. Does the Bank Have to Continue to Pay Interest on My CD After It Matures
One quirk catches people: many banks count the maturity date as day one of the grace period, even when it falls on a weekend or holiday. If a ten-day period starts on a Saturday, you’ve already burned two days before Monday morning. Count the calendar, not the business days.
What You Can Do During the Grace Period
Inside the window, you have full control of the money. The common choices:
- Withdraw the full balance, principal and earned interest, into a checking or savings account or as a cashier’s check.
- Take a partial withdrawal and let the rest renew.
- Renew into a different term at the same bank if a longer or shorter CD is now paying a better rate.
- Move the funds to another bank or credit union by ACH transfer, which usually settles in one to three business days.
If you’re transferring elsewhere, start early. ACH processing can eat into the window, and if the transfer isn’t initiated before the grace period closes, the bank may auto-renew first, which would then trigger an early withdrawal penalty on the new CD when the transfer pulls the money out.
What Happens If You Do Nothing
Silence is a decision. If the grace period ends without instructions from you, most banks roll the entire balance, both principal and accrued interest, into a new CD with the same term length as the one that just expired.3Consumer Financial Protection Bureau. What Is a Certificate of Deposit (CD) Rollover or Renewal
The rate on the renewed CD is whatever the bank’s current standard rate is for that term, not the rate you originally locked in. This is where auto-renewal quietly costs people money. The CFPB specifically warns consumers to check whether the bank is running a promotional rate that beats the default rollover rate, because auto-renewals rarely capture those higher offers.3Consumer Financial Protection Bureau. What Is a Certificate of Deposit (CD) Rollover or Renewal Even if you want to stay in a CD at the same bank, actively asking about current rates during the grace period usually beats letting the rollover happen on autopilot.
The Notice Your Bank Must Send Before Maturity
Federal rules under Regulation DD require your bank to give you advance written notice before an automatically renewing CD matures, as long as the original term was longer than one month. The standard timing is at least 30 calendar days before the maturity date. Banks can alternatively send the notice at least 20 days before the grace period ends, but only if the grace period is at least five calendar days long.1eCFR. 12 CFR Part 1030 — Truth in Savings (Regulation DD)
The notice generally has to tell you the maturity date and the new interest rate and APY that will apply, or say that the rate hasn’t been set yet and give you a number to call when it is. If your CD has a term of one month or less, the bank has no obligation to send any advance notice at all.4eCFR. 12 CFR 1030.5 — Subsequent Disclosures Short-term CDs are a blind spot for many depositors. If you hold one, put the maturity date on your own calendar and contact the bank yourself.
Getting Out After the CD Renews
Once the grace period closes and the CD renews, the new term behaves like any other CD. Pulling the money before the next maturity date triggers an early withdrawal penalty. For a CD to qualify as a time deposit under federal rules, the penalty must equal at least seven days’ worth of interest.1eCFR. 12 CFR Part 1030 — Truth in Savings (Regulation DD)
In practice, banks charge far more than that floor. Typical penalties run around three months of interest for a one-year CD, roughly six months for a two-year CD, and eight months or more for a five-year term. On a large balance, that can wipe out a meaningful share of your earnings. That is the real cost of missing the grace period: you aren’t just locked in, you’re locked in with a penalty attached to the exit door.
Taxes on the Interest You’ve Earned
Interest earned on a CD is taxable as ordinary income in the year it becomes available to you. For a CD that pays interest annually or credits it to a separate account, you owe tax each year the interest is credited, not just when the CD matures. For a CD that compounds and holds all the interest until maturity, you typically report the interest in the year the CD matures and the money becomes accessible.5Internal Revenue Service. Topic No. 403, Interest Received
Your bank will send a Form 1099-INT for any year the CD earns $10 or more in interest. Even if you don’t get one because the interest fell below that threshold, you still have to report the income. And if the CD rolls over automatically, the IRS treats the credited interest as taxable in the year it became available, whether or not you actually withdrew it.
FDIC Coverage Through Maturity
Your funds remain covered by FDIC insurance through the maturity and renewal process. The standard limit is $250,000 per depositor, per institution, per ownership category, and that cap includes both your principal and all accrued interest.6FDIC. Shopping for a Certificate of Deposit If you opened a CD near the insurance limit and it has earned significant interest over a long term, the total balance at maturity may have grown past $250,000, and the excess is uninsured. The grace period is a good moment to move part of the balance to another institution if you are approaching the cap.