Have a CD Maturing Later This Year? Here’s Why You Need to Be Careful

Many people rushed to put money into CDs last year when rates were up. And that made sense. If you had a pile of cash you weren’t using and didn’t need for emergency fund purposes, why wouldn’t you want the best return on that money possible?

But if you have a CD maturing later this year, it’s important to figure out when it comes due. If you let that date pass you by, you may be in for a world of financial hurt.

Don’t let your bank make a decision for you

Many banks will automatically renew a CD once it matures unless you tell them otherwise. Some banks are really good about sending out reminders about maturing CDs. But that’s not a given. And if you don’t go into your account and decide what you want to do with your CD at maturity, your money might land in a new CD with the same term — even if that’s not what you want.

That could be especially problematic given that the Federal Reserve is expected to cut interest rates between now and the end of the year — and potentially more than once. If rate cuts happen between now and when your CD matures, you may get stuck with a lower CD rate if your CD renews automatically.

As an example, right now, Capital One is offering a 5.00% APY on a 12-month CD. But what if you opened a 12-month CD last November? 

By November 2024, the APY on a 12-month CD may be down to 4.25%. And you may not want to renew at that level. But if you don’t go into your account and tell your bank you want to cash out your CD, then you may not get that choice.

Be careful with a CD ladder

Savers are often advised to ladder CDs rather than put all of their money into a single CD. With a CD ladder, what you might do is take a sum of money and split it up into a 3-month CD, 6-month CD, 9-month CD, and 12-month CD, rather than put your entire deposit into a single 12-month CD. 

That way, you have money becoming available every three months. And that lessens your chances of getting hit with an early withdrawal penalty for cashing out a CD prior to maturity.

But if you set up a CD ladder last year, or even earlier this year, then it’s really important to mark the maturity dates of your various CDs on your calendar, and then log into your various accounts ahead of those dates to tell your bank what to do with your money. You should have multiple options that could include:

• Cashing out your CD and having the money land in your savings account
• Rolling your CD into a new one with the same term
• Rolling your CD into a new one with a different term (for example, going from a 12-month CD to a 6-month CD)

Either way, it’s your money in that account. So you should get to decide what to do with it, not your bank. Make sure to take that step, so you don’t wind up disappointed.

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