Here’s what you can do with your money when your CD term ends

In exchange for higher interest rates, certificates of deposit (CDs) require that you commit to keeping your money in the bank for a fixed number of months or years. Your CD’s end date, also known as its maturity date, is an important day to mark on your calendar. If you have a traditional CD account, the maturity date indicates when you can finally access your money penalty-free.

To prepare yourself for when your CD term ends, it’s important to know what options you’ll have by the time it hits its maturity date. Once the maturity date arrives, banks typically offer a one- to two-week grace period where you can decide what to do with your money. If you don’t take any action during that brief window of time, the bank will decide for you, resulting in renewing your CD for another term.

Below, CNBC Select breaks down the three options savers have when their CD matures.

You may be OK with your bank renewing your CD for another term, and in that case, you might not have to do anything. Your bank will likely automatically renew your CD for the same term it originally had. For example, if you had a six-month CD, the bank would roll it over into a new six-month CD.

While this hands-off approach requires little effort on your part, take notice of the current annual percentage yield (APY) being offered by the bank for that specific CD term. Your renewed CD’s rate will most likely be at the most recent rate offered, rather than your original rate. This could be good or bad news, depending on if the new rate is higher or lower than your original rate.

In addition to checking the APY being offered, if you decide to renew you may also want to consider adding more money to your initial deposit. Traditional CDs don’t allow added contributions during their term, so this is your chance to increase your principal amount.

If you decide to keep your money in a CD but want a shorter or longer term, this is the time to make the switch. During your grace period, you can withdraw your funds and deposit them into a different CD account, whether at the same bank or a completely separate bank.

You may want to transfer if you want a term with a different length. Opt for a shorter term if you think you’ll need access to that money sooner, or, consider a longer term if you want to lock in a good interest rate and don’t need the funds for some time.

When choosing this option, shop around for the best CDs and rates. Online banks offering high-yield CDs are usually your best bet but make sure you know the fees beforehand. The top ones offer APYs more than double the national average, are FDIC-insured, have zero monthly maintenance fees and low minimum deposits (requiring $1,000 or less) to open an account.

For those looking for the right CD, consider Marcus by Goldman Sachs or Ally. Marcus by Goldman Sachs offers CDs with term lengths ranging from 6 months to 6 years and has a low minimum deposit requirement of $500. Ally offers their customers slightly shorter CD lengths of 3 months to 5 years, has no minimum deposit requirement and provides 24/7 customer support.

If you opened up a CD account specifically to save up for a certain goal, such as a down payment on a first home, then you likely have been waiting for this grace period to come.

Unless you have a no-penalty CD, it costs you to withdraw your funds before your CD term is up. Early withdrawal penalty fees vary depending on your bank and your CD’s term length, but it’s usually the interest earned, or the interest that you would have earned, over a certain number of days or months. Generally, the longer the CD term length, the costlier the withdrawal penalty.

This is why it’s crucial you wait until the grace period to touch your money sitting in a CD account. With many banks compounding interest on your savings daily, that additional interest can add up.

If you didn’t have a specific savings goal, you may want to withdraw your funds anyway and deposit them in something more accessible. A checking account for spending or a high-yield savings account to continue saving are two traditional options. If you are looking for a better return and can handle more risk, you also have the option of investing your matured CD funds (including the interest earned) in a brokerage account.

Charles Schwab offers users many investing resources and retirement planning tools in addition to no commission fees for stocks, ETFs and over 4,000 mutual funds.

When your CD term ends, knowing what options are available can help you streamline your decision-making. Whether you are leaving your money put, moving it to a new CD, or switching up your investing strategy, take the time to figure out which is the best option for you currently.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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