November 21, 2017

The Importance of Understanding CD Maturity Dates

CD Maturity DateEvery time you invest in a Certificate of Deposit it has a deposit date and a maturity date. It is very important that you understand what it means for your CD to mature and to know when this will happen. Cashing out on your CD before the maturity date will usually result in a penalty, such as the loss of all of the interest you have been accumulating.

What is a Maturity Date

A CD is a type of time deposit account. These accounts must be left untouched for a specified amount of time so that the invested funds can earn interest. The maturity date is the date that the CD term ends and the investor is finally able to withdraw his or her money. Just when the CD will mature, be it several months or several years, is dependent upon the CD term that one invests in.

In general, the longer the term of the CD, i.e. the further away from the maturity date it is, the higher your rate of interest will be on the CD. Earning more money by selecting long-term CDs can sound very rewarding. Just remember that once your money is deposited it is tied up on the account and, in most cases, it cannot be retrieved without incurring a penalty. The harshness of the penalty depends on the bank or credit unions, but it will range anywhere from losing the built up interest to losing some of the principle deposit as well.

Why These Dates are Important

As mentioned before it is important to know your CD maturity date so that you do not get fined for premature withdrawal. Another reason it is important is because when the time comes banks and CD lenders typically will renew the account and rollover the funds into a new deposit with the same terms. Unless you have given the bank specific instructions not to renew, you could miss out on having access to your money until the second maturity date arrives. Knowing the maturity date is crucial if you don’t want to reinvest because you need the money, or because interest rates have gone up.

In Conclusion

Understand Maturity DatesYou should take steps to understanding every part of your CD and its terms and conditions. This includes realizing what maturity dates are and knowing when yours is due to end. Be proactive by putting the end date in your phone or calendar. Banks should send out a renewal notice, but the grace period usually only lasts ten days. By educating yourself on the terms and conditions of your CD you will be able to reap the benefits and take control of your funds once they mature.