If you have money sitting in a CD, it’s important to have a plan for what to do once it matures. If you want the money back, you can withdraw it or transfer it to a bank account.
However, if you don’t take any action, the CD will likely roll over or “renew.” In this case, the bank puts the money back into a new CD with the same term (but possibly a different interest rate). Most banks will automatically renew your CD within 10 days of the maturity date, unless you specifically tell them not to.
So, is it a good idea to renew your CD? Here’s what you need to know.
What does it mean to renew (roll over) a CD?
When it comes to CDs, rolling over or renewing means you take money from a matured CD and put it directly into a new one with the same bank at the same term.
If your CD matures, and you don’t do anything with the money, the bank will likely renew your CD automatically. Here are a few things you need to know about automatic CD renewal:
- The interest rate on the new CD will likely be lower if overall CD rates have dropped. However, it could be higher if rates have gone up since you first opened your account.
- Your new CD rate will be locked in on the date your old CD matures.
- Your new account will usually have the same CD term, meaning the same length of time to maturity.
- Early withdrawal penalties will apply to the new CD.
If the bank does not automatically renew your CD, you can choose to renew it manually.
When you go this route, make sure to start by reviewing the CDs and rates that are currently available. Then you can follow the bank’s instructions to choose a CD and the amount you want to deposit.
Understanding CD renewal grace periods
A CD grace period is a window of time during which you can withdraw the cash from your now-mature certificate of deposit account without incurring penalties. CD grace periods begin at the end of a CD’s term and often last around two weeks or less. However, you should check the terms and conditions of your account for specific details since some grace periods can be shorter.
If you fail to take action within your grace period, your financial institution may automatically renew your CD. Often, a renewal CD has the same term as your original account, but the interest rate on your new CD could be lower or higher compared with your previous account, depending on the current rates the bank is offering. Again, it’s important to confirm these details with your financial institution.
While you might want to let your bank or credit union renew your CD, it’s still important to review your options before you allow a rollover to take place. Even if you want to keep your cash in a new CD and you’re fine with the same term, you should always compare your options first.
Pros and cons of renewing a CD
| PROS | CONS |
|---|---|
| Convenient | New CD rate may be lower |
| Continue earning interest | Funds are locked in for the full term; early withdrawal penalties apply |
| Guaranteed return and safety | Missed opportunity to shop around for a better account |
What if I don’t want to renew my CD?
It’s easy to let the bank automatically renew your CD, since no action is usually required. But it might not be the best move. Here are some alternatives that could better fit your financial situation:
- Withdraw the money: If you want to use the funds for a specific financial goal, such as paying off high-interest debt or saving more for retirement, you can withdraw the funds.
- Consider a different type of deposit account. Compare rates and other benefits from multiple financial institutions to find the most suitable account. If you want easier access to your money, a high-yield savings account (HYSA) might make more sense. If you want a high APY and check-writing privileges, you could consider a money market account.
- Move it to a better CD: Before you let your bank automatically renew your CD, compare today’s CD rates at other financial institutions so you can earn the highest possible return.
- Choose alternative investments. If your priorities have shifted, you might want to pursue other investments such as mutual funds, IRAs, stocks, or bonds. Market investments are riskier than CDs while also offering the potential for higher returns. Think about getting advice from a professional financial adviser if you’re considering these kinds of investments.
If you don’t take action before your grace period ends (usually 7 to 14 days after maturity), the bank will automatically lock your funds into a new CD for the same term. Withdrawing your money after this window will trigger an early withdrawal penalty, which typically forfeits a portion of the interest earned.
No. Your renewed CD will take on whatever current interest rate the bank is offering on your maturity date for that specific term length. Depending on economic trends, this rate could be significantly higher or lower than your original rate.
Yes. The grace period is your penalty-free window to adjust your account. You can withdraw a portion of the funds, add more money to increase your balance, change to a different term length (e.g., from 12 months to 6 months), or close the account completely.
A High-Yield Savings Account gives you full liquidity to deposit or withdraw funds at any time without early withdrawal penalties. However, HYSA interest rates are variable and fluctuate with the market, whereas a renewed CD locks in a guaranteed rate for the entire term duration.
Most banks allow you to set up “maturity instructions” ahead of time through online banking or customer service. You can select an option to automatically transfer the principal and interest to a checking or savings account upon maturity, preventing an automatic rollover.
Suresh holds a Master of Commerce (M.Com) degree and is a dedicated personal finance researcher and writer. Combining his advanced academic background in commerce with deep industry research, he covers complex topics like taxation, banking systems, credit analysis, and personal finance strategies. As the founder of Tax Assistant (taxassistant.org), Suresh is committed to translating complicated financial guidelines and economic data into simple, accurate, and actionable educational resources for everyday readers.
