Have a CD Coming Due Before the End of the Year? Make This One Move Before Renewing It

Over the past year and change, savings account and CD rates rose in the wake of the Federal Reserve's series of interest rate hikes. And so you may have been tempted to put some of your money into a certificate of deposit (CD) for the guaranteed higher APY. But if you have a CD coming due before 2023 comes to an end, it's important to take action rather than let your bank make its own decision with regard to that money.

Have a voice in what happens to your cash

When you have a CD coming due, what'll often happen is that if you don't tell your bank what you want to do with that money upon its maturity, your bank will automatically roll your cash into a new CD of the same length. So let's say you have a 6-month CD coming due toward the end of December. If you don't decide what to do with that money, your bank's default option might be to roll that balance into a new 6-month CD.

But that may not be what you want, for a few reasons. First, it may be that you can no longer afford to have that cash locked away in a CD at all. And also, it may be that you don't want a 6-month CD because you'd rather choose a CD with a better interest rate and a different term. So it's important to log into your account and actively choose to either cash out your CD or roll it into a new product of your choice.

See what CD rates look like today

The interest rate you'll get on a CD will hinge on your financial institution as well as the length of your CD. It's a good idea to look at rates to help inform your decision.

At Capital One, for example, you'll get an APY of 4.25% on a 6-month CD. But you may be looking for a higher interest rate than that, in which case you could open a 12-month CD at a more generous 4.80% APY.

However, that assumes you're able to leave your cash locked up for a full year. That's something you'll need to decide on. Remember, cashing out a CD early tends to result in a penalty, the exact amount of which will be determined by your bank. But you don't want to set yourself up to potentially lose a few months' worth of interest when instead, you could just put your money into a regular savings account and not have to worry about when you take withdrawals from it.

Think about your 2024 objectives

Maybe you weren't planning any major financial moves in 2023. But if 2024 is shaping up to be different, then you may not want to put your money into a CD at all.

Let's say you're hoping to buy a car in 2024. If so, you may not want to tie up money you might need for a down payment.

Or, maybe you had to take a large withdrawal from your emergency fund in 2023 to cover a home repair. You may want some or all of the money you had in your CD to go into your emergency savings so you're prepared for unplanned expenses in the new year.

Of course, you may decide to simply let your bank roll your money into a new CD of the same length and call it a day. But the operative word here is "decide" -- as in, you should be making an active choice instead of allowing your bank to make that determination.