What to do when a CD matures: notices, grace periods and rollovers

Which of these are you?

• Your CD matures in the next 30 days and you have not looked at the notice: find it now, note the maturity date and grace period, and jump to the checklist near the end of this chapter.
• You need the money within the next few months: withdraw it at maturity into Tier 1 or Tier 2. Do not extend a CD for cash you will spend.
• The CD is a rung of a ladder and you do not need the cash: roll it into the longest rung, unless the curve is inverted. The inverted-curve section has the break-even number.
• You missed the grace period and the CD renewed: the break-even math near the end tells you whether leaving with a penalty beats staying.

What does the bank have to tell you before a CD matures?

For an auto-renewing CD longer than one month, the bank must send its disclosures at least 30 calendar days before maturity, or at least 20 days before the grace period ends if the grace period is at least five calendar days (12 CFR 1030.5(b)). Your account agreement must also state whether the CD renews and how long any grace period lasts.

The rules come from Regulation DD, the Truth in Savings rule. Three details matter for your decision.

First, what the notice says depends on the term. For an auto-renewing CD longer than one year, the bank must give you the account disclosures for the new account, plus the date your existing account matures. If it does not yet know the new rate and APY, it must say the rates have not been determined, the date they will be determined, and a phone number to call. For a CD of one year or less, the bank can provide either those disclosures or a shorter set: the maturity date, the new maturity date, the new rate and APY if known, and any difference in terms.

Second, the account agreement at opening must say whether the CD renews automatically, and if it does, whether a grace period is provided and how long it is (12 CFR 1030.4(b)(6)(iv)). The regulation does not set the grace period's length, and its alternative notice timing assumes one of at least five calendar days. Each bank picks its own. Do not rely on a number you read elsewhere: read yours.

Third, a CD that does not renew automatically has its own rule. If it is longer than one year, the bank must send the maturity date and say whether interest is paid after maturity, at least 10 calendar days before maturity (12 CFR 1030.5(c)). If interest stops at maturity, the money sits idle until you move it, which is a quiet cost of doing nothing.

The notice is a floor, not a reminder service. It may arrive by mail or as an electronic notice you never open. Set your own reminder ahead of it, as in the checklist below.

Why is doing nothing a decision?

Doing nothing means accepting whichever default your agreement names: a renewal at the rate the bank sets that day, or idle cash. Either can cost real money, and the auto-renewed CD also starts a new penalty clock on your money.

A hypothetical shows the size. A $20,000 CD matures. The bank renews it for 12 months at a posted 2.00% APY. Elsewhere a 12-month CD pays 4.00% APY. These rates are round numbers chosen for the example, not quotes.

• Auto-renew: $20,000 x 2.00% = $400 of interest over the year.
• Move to the 4.00% CD: $20,000 x 4.00% = $800.
• Cost of doing nothing: $800 minus $400 = $400 for the year.

The cost scales linearly with the balance, so a bigger CD makes the same mistake more expensive:

The gap between rates, 2.00 percentage points here, is the number to compute at each maturity: gap in points x balance is the dollars per year you give up. A renewal rate that is not the bank's best is not always a mistake, because moving money has its own friction. But it is a choice you should see before it happens, with a number attached.

What are your options at maturity?

At maturity you can withdraw the cash, renew with the same bank, move to a different CD, or move to savings. The choice depends on when you will need the money, which is the same question the three tiers ask.

Ask your bank what it allows during the grace period, such as changing the term or adding funds, and get the answer in writing. The one thing you can count on is that your agreement must state whether a grace period exists and how long it lasts.

The choice between another CD and savings often comes down to a small gap. If a 12-month CD pays a hypothetical 4.25% and a savings account pays 4.00%, the gap is 0.25 percentage points, which is $25 a year per $10,000. For money you might need, that $25 buys full access with no penalty, which is usually worth more. For money with a date you will not touch, the CD's guaranteed rate is worth keeping. Chapter 5 compares these homes in full.

Which way should a ladder rung go: extend or take the cash?

Roll the rung into the longest term if you do not need the cash within the next spacing interval and the longest term pays at least as much as the shorter ones. Otherwise take the cash. The ladder's shape matters less than what the money is for.

The decision rule has three questions, in this order:

1. Do I need this cash before the next rung matures? If yes, withdraw it into Tier 1 or Tier 2. A matured rung is new money, not part of the ladder's obligations.
2. If not, does the longest term pay at least what shorter terms pay? If yes, roll into the longest term. The ladder keeps its spacing, and you capture the term premium.
3. If the curve is inverted, what average rate do I need on the rest? See below.

Recall the ladder maturity formula from Chapter 6: after each roll, remaining maturities run from the spacing s up to N x s months, so average remaining maturity stays at s x (N + 1) / 2. Extending keeps that number. Withdrawing shrinks the ladder by one rung, and average remaining maturity falls.

What should you do when the curve is inverted?

When shorter CDs pay more than longer ones, extending costs you current yield and buys protection against lower future rates. The decision number is the average rate the remaining years must earn for rolling short CDs to tie the lock, and you compare it with your own view of your cash needs, not a forecast.

A hypothetical: a $10,000 rung matures. A 1-year CD pays 4.50% APY and a 5-year CD pays 3.90%. Locking for five years gives up 4.50% - 3.90% = 0.60 points, or $60 in the first year. The 5-year lock is worth $10,000 x 1.039^5 = $12,108.15 at year five.

For rolling to tie that lock, the 1-year CD earns 4.50% in year one and then the same money must earn an average rate r for four more years:

1.045 x (1 + r)^4 = 1.039^5, so r = (1.039^5 / 1.045)^(1/4) - 1 = 3.75%.

That is the whole decision. If you expect the following four years to average below 3.75%, locking wins. If they average above it, rolling short wins. This is a break-even, not a forecast: it tells you what would have to be true, and a ladder exists precisely because no one knows which side of it we will land on. You can also split the difference: roll part of the rung long and part short, or leave the inverted-curve rung at a shorter term while the rest of the ladder keeps its length.

Chapter 11 explains the curve itself from Treasury data, and Chapter 13 covers how to adjust as rates rise or fall.

What if you missed the window?

If the CD renewed, you can leave with an early withdrawal penalty, and the break-even math tells you whether it pays. Use the same model as Chapter 3: the penalty comes out of the money you reinvest, and you compare the result with keeping the renewed CD.

Suppose the $20,000 CD renewed for 12 months at 2.00% APY, and you can move the money to a 4.00% CD. The bank's penalty is a hypothetical 90 days of interest at the CD's rate, which varies by bank, so read your agreement.

The penalty is $20,000 x 2.00% x 90 / 365 = $98.63, so $19,901.37 moves to the new CD. Keeping the renewed CD yields $20,400.00 at month 12. Breaking and reinvesting yields $20,697.42. Breaking wins by $297.42, and it would still win as long as the new CD pays more than about 2.51% APY. Note that it wins by less than the $400 gap: the penalty and the smaller reinvested balance eat about $103 of it.

Prevention is cheaper than repair: leaving costs the penalty and shrinks the reinvested balance. Chapter 3 covers the penalty mechanics and the break-even in full.

How do you track maturities and set alerts?

Keep one list with, for each CD, the bank, the amount, the APY, the maturity date, whether it renews automatically, and the last day of the grace period. Set a reminder about 45 days ahead, so you look before the 30-day notice is due, and another at 14 days.

A workable rhythm for each rung:

1. 45 days out: open the list and confirm the date. Check the current rates for the term you would roll into.
2. 30 days out: the notice should have arrived. If it has not, call. The rule requires it at least 30 days ahead, or at least 20 days before the grace period ends where the grace period is at least five days.
3. 14 days out: decide. Choose withdraw, roll or move, and start any transfer or new account so it is ready before maturity.
4. Maturity day: confirm the outcome the same day. Note the new maturity date and grace period end in the list.
5. Grace period end: the last day to act without penalty.

SwitchWize's Tracking Center supports part of this. A signed-in user can turn on tracking for a saved CD and enter its maturity date, and the system emails a reminder starting 14 days before maturity that shows the best CD rate and the best savings rate that day beside the rate your CD pays. It is a prompt, not a guarantee, and it works only for CDs you have saved and tracked at your Tracking Center. Your own calendar remains the primary safeguard.

What else changes when a CD rolls?

Rolling a CD adds its interest to the balance at that bank, and that interest counts toward FDIC limits. The amount of a deposit includes accrued interest, so a rung that grows can cross $250,000 at one bank without any new deposit.

FDIC insurance covers $250,000 per depositor, per insured bank, per ownership category, and 12 CFR 330.3(i)(1) counts interest that has been credited plus interest accrued to the date of a bank's failure. If your ladder is large and concentrated at one bank, check the total including interest at every roll. The interest itself is taxed in a way that depends on the term and how it is paid, which the phantom income guide covers.

Maturity checklist

Use this the day you open a CD, and again 45 days before each maturity.

• Write down the maturity date, renewal setting and grace period length from your account agreement.
• Set reminders at 45 and 14 days before maturity, and one for the grace period end.
• At 45 days: check the rate for the term you would roll into, and compute the gap in points times the balance.
• Ask what the money is for: within 30 days, Tier 1; within 180 days, Tier 2; a dated goal inside 720 days, a CD near that date; otherwise the longest rung.
• Check the bank total including interest against the FDIC limit for your ownership category.
• After acting, record the new maturity date, the new grace period and the confirmation.