CD Maturity Explained

CD's have maturity, which is the time when their terms expire. When the maturity date is reached the bank can stop paying the pre-agreed interest. Additionally, this is the time when you can finally take the money you have invested and use them as you wish.

CD Maturity Basics

When you buy a CD you agree with the bank to invest a particular sum of money. The bank in turn pays you a certain percentage of interest. This agreement lasts for a pre-determined time period. Additionally, when this time period expires, namely when the CD matures, you should make a decision on whether to reinvest your money in a new CD or withdraw the money.

Most of the banks offer an automatic reinvestment in a new CD when maturity is reached. If you select this option you should have in mind that the bank keeps your money when the CD's are renewed. Generally, the same terms are applied as the ones from the previous CD. On the other hand, in case the interest rate of the CD's has changed, you will also have a new rate with the new CD.

However, before making the decision on whether to reinvest your money in a new CD, it is better to make a research on the available alternatives. You may find CD's offered by another institution which have better interest rates.

Keeping Track of CD Maturities

In order to keep track of the maturities of your CD's all you have to do is to read the mail you receive from your bank. It is required that every reputable bank sends such information to its clients. Banks should also note in the mail whether any renewals have taken place.

If you don't receive such information by mail, you can check it online. If this option is also not available, you should call your bank and ask for the maturity date of your CD's.

However, you should not wait for the date of maturity to come to think over your future course of action. Research the available opportunities beforehand or otherwise you can end up taking a not so good decision being under the pressure of the last minute.

Early Withdrawal before the CD Matures

If an emergency situation arises and you need to withdraw money form your CD before maturity has been reached, you can do it. But, you should have in mind that you may incur penalties for the early withdrawal you make.

Examine the alternatives you have by taking in mind the amount of money you need, how you are going to use it as well as the fees with which you will be penalized for the early withdrawal. Sometimes it may not be cost efficient to take money out of the CD and it may be better to borrow from other sources until maturity is reached. Make the needed calculations and comparisons and decide on the best course of action.

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