When a CD matures, your bank opens a short grace period — usually seven to ten days — during which you can withdraw the money, renew it, or send it somewhere else without paying a penalty. Miss that window and most banks automatically roll your balance into a new CD at whatever rate they’re currently offering, locking the money up for another full term. So what happens when a CD matures depends almost entirely on whether you give the bank instructions in time.
The Grace Period
The grace period begins the day your CD reaches maturity. During it, you can take the money out, move it, or change the terms of a renewal without triggering an early withdrawal penalty. Length varies by bank and by the CD’s terms; seven to ten days is common, and federal rules set a five-day minimum when the bank uses a specific alternative notification schedule.1eCFR. 12 CFR 1030.5 – Subsequent Disclosures
One catch surprises a lot of depositors: banks are not required to pay interest on your funds during the grace period. If you decide partway through the window not to renew, you may not earn anything beyond the interest that accrued through the original maturity date.2eCFR. 12 CFR Part 1030 – Truth in Savings, Regulation DD Have a plan ready before maturity rather than letting the money sit idle while you decide.
What Automatic Renewal Actually Does
If the grace period ends and you haven’t told the bank otherwise, the bank typically rolls your entire balance — principal plus accrued interest — into a new CD with the same term length as the original. The new CD carries the bank’s current rate for that term, not the rate you were earning before. Depending on where interest rates have moved, the new rate could be noticeably lower or higher.3Consumer Financial Protection Bureau. What Is a Certificate of Deposit (CD) Rollover or Renewal
Once that renewal takes effect, you’re locked in for the full new term. Realizing a month later that you need the cash, or that a competitor is paying a full percentage point more, means paying an early withdrawal penalty to get out. That is the real cost of missing the grace period.
The Notice Your Bank Owes You
Federal regulations require your bank to alert you before a CD matures, but the rules depend on the term. For CDs longer than one year that renew automatically, the bank must send a notice at least 30 days before maturity, or at least 20 days before the end of the grace period if that period runs at least five days. For CDs longer than one year that do not renew automatically, notice must come at least 10 days before maturity, and the bank must tell you whether interest keeps accruing after the term ends.1eCFR. 12 CFR 1030.5 – Subsequent Disclosures
CDs with terms of one year or shorter are not covered by these specific federal notice deadlines, though many banks send a courtesy reminder anyway. Check your original account agreement. If you agreed to electronic disclosures when you opened the account, the notice can arrive by email or through your online banking portal rather than by paper mail.2eCFR. 12 CFR Part 1030 – Truth in Savings, Regulation DD Watch for it, because a missed email is functionally the same as a missed decision.
Your Options at Maturity
Once you know your maturity date, the choices are straightforward.
- Withdraw everything. Take the full balance — original deposit plus earned interest — and move it to checking, savings, or another use.
- Renew at the same bank. Roll the balance into a new CD, keeping the same term or switching to a shorter or longer one. Compare the bank’s current rates across terms first.
- Move to a different bank. Transfer the funds to a CD or other account at a competing institution. You’ll need the receiving bank’s routing number and your new account number.
- Take a partial withdrawal. Some banks let you pull out part of the balance and renew the rest. Not every bank offers this, so ask before assuming.
- Build a CD ladder. Split the balance across CDs with staggered maturity dates — for example, one-year, two-year, and three-year terms — so a portion comes due regularly while the rest keeps earning a fixed rate.
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 land in your brokerage account’s cash position, and you decide what to do next.
Brokered CDs also carry features that traditional bank CDs don’t. They generally pay simple interest at regular intervals instead of compounding inside the CD. Some are callable, meaning the issuing bank can redeem the CD before its stated maturity — you get principal and earned interest back, but lose the remaining term’s income. If you need out before maturity, you can try to sell on the secondary market, but the price depends on current rates and a buyer isn’t guaranteed.4Investor.gov. Brokered CDs
Taxes on the Interest You Just Earned
Interest on a CD is taxable in the year it becomes available to you, even if you never touch it. The IRS calls this constructive receipt: once interest is credited to your account or otherwise made available, it counts as income for that tax year.5eCFR. 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 withdrew it.
Your bank will send Form 1099-INT for any year you earned $10 or more in interest. Box 1 shows total taxable interest; Box 2 separately shows any early withdrawal penalty you paid, which you can deduct as an above-the-line adjustment to income without itemizing.6Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID7Internal Revenue Service. Penalty on Early Withdrawal of Savings Make sure the bank has your correct taxpayer identification number, or it may apply backup withholding to your interest.8Internal Revenue Service. Topic No. 403, Interest Received
If the CD Is in an IRA
When the maturing CD sits inside an IRA or other retirement account, the money stays tax-deferred as long as it remains in a qualified account, but 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 the IRS doesn’t count it against the one-rollover-per-year limit because it isn’t considered a rollover.9Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
If the money is instead distributed to you personally, you have 60 days to deposit it into another qualified retirement account. Miss the deadline and the IRS treats the distribution as taxable income; if you’re under 59½, add a 10 percent additional tax on the unrolled amount. Your bank will also withhold 10 percent for taxes at the time of the distribution, so to roll over the full amount you’d need to make up the withheld portion from other funds.9Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
If the Account Holder Has Died
When the CD owner has passed away, the FDIC continues insuring that person’s accounts at the same level for six months after the date of death, giving survivors or an executor time to retitle or distribute the funds without losing coverage.10FDIC.gov. Death of an Account Owner
If the CD was set up as payable-on-death, the named beneficiary can claim the funds by contacting the bank and presenting a death certificate. POD accounts bypass probate. The beneficiary can typically withdraw the balance, retitle the CD, or leave the funds in place until maturity. With no beneficiary named, the CD becomes part of the estate and passes under the will or state intestacy laws, and the executor will usually need letters testamentary or similar court documents to work with the bank.
How to Give the Bank Your Instructions
Once you’ve made a decision, communicate it before the grace period ends. Most banks accept instructions through several channels:
- Online banking. Log in and look for a maturity instruction option on the CD account page.
- Phone. Call customer service with your CD account number and give the instructions to 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 pre-maturity notice; fill it out and return it, allowing enough time given the short grace period.
If you’re moving funds to a different institution, have the receiving bank’s routing number and your new account number ready. For an IRA CD, tell the bank explicitly that you want a trustee-to-trustee transfer so nothing is withheld. Banks typically process maturity instructions within one to three business days and send confirmation. Keep the confirmation, especially if you closed the CD entirely; it’s your proof the account was handled the way you directed.