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304 North Cardinal St.
Dorchester Center, MA 02124
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One of the most attractive features of a certificate of deposit (CD) account is its safety and stability. When you open a CD, you agree to a fixed interest rate and account term, so you know from the outset how much you’ll earn and how long your money needs to stay where it is.
When your CD reaches maturity at the end of its agreed-upon term, you’ll quickly have to decide what to do with it next. You have a few basic options when your CD matures: leave your money where it is, move it to a new account, spend it, or put it toward long-term goals. If you’re staring down your CD’s moment of maturity, here are a few things to think about as you consider your options.
Many CDs have a feature that automatically renews your account at maturity by rolling your funds (including interest) into a new CD. Your new CD may have the same term (six months, one year, three years, or whatever your original CD had) but at the current interest rate. If you do nothing when your CD matures, your account may renew automatically. This may not be a disaster, but it could represent a missed opportunity.
When your CD matures, you can also consider new alternatives, including adding money to your CD balance, changing the term of your CD, shopping for a better interest rate, or moving your money to a new type of account. You may want your funds to be more accessible, without the withdrawal restrictions CDs typically have. Or you may want to put your funds into a tax-advantaged account like a 529 educational savings account or IRA.
When your CD matures, you typically have a grace period of seven to 10 days to decide what to do with your money—before your funds automatically renew or the bank writes you a check for the balance. This is your chance to be proactive.
For every CD you own, note the maturity date and grace period on your calendar. That way, you’ll have time to start thinking about your options well in advance. Your financial institution will send you a letter when your CD is about to mature, but it may be better to track this information on your own so you’re ready to act when your CD matures and the clock starts ticking on your grace period.
Each bank may handle this situation differently. Your bank or credit union might send you a check for the account balance, including interest. It might hold your funds in the account with or without paying interest. Or your CD might auto-renew, which could mean having to pay an early withdrawal penalty if you want to access your money before the new CD term ends.
The most important step to take when your CD matures is to rethink your options. You may decide that your money is best kept exactly where it is—in a renewed CD at the same bank or credit union. But why not arrive at that decision after checking around for better interest rates and terms, considering alternatives like high-yield savings or money market accounts, or re-evaluating long-term goals like college savings or retirement? You won’t know what’s best if you don’t know what’s out there.
Here are a few alternatives worth a look, especially if economic factors—or your personal priorities—have changed:
If you have a CD that’s approaching maturity, give yourself a pat on the back for saving money successfully. Planning ahead for maturity day gives you the opportunity to optimize returns on your savings and remind yourself that it’s good to engage with your finances. Learning about current interest rates, researching different kinds of accounts, and thinking about investing or retirement goals are all part of active money management—a practice that’s good for you and your money.
For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you make the best financial decisions for your future.
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