My CD Term Is Coming to an End. Now What?

It's a decision you don't want to botch.

There are plenty of good reasons to open a certificate of deposit, or CD. For one thing, CDs commonly pay higher interest rates than regular savings accounts, so if you want a better return on your money, a CD is a good bet.

Also, opening a CD could make it so you're more likely to leave your savings alone. With a CD, you commit to leaving your money in the bank for a preset period of time. It could be six months, 12 months, or longer.

If you cash out your CD prematurely, you generally face a penalty equal to a few months of interest (ultimately, each bank can set its own penalties). So if you're the type who tends to dip into savings on a whim, a CD could help break you of that habit.

Meanwhile, if you have a CD whose term is now coming to an end, you have a choice. You could roll your money into a new CD, or you could cash out your CD and put your money elsewhere. Here's how to make the call.

Do you need more cash reserves?

A lot of people are worried about an impending economic downturn -- namely because financial experts have been sounding recession warnings for months. If you're concerned about losing your job in the near term, then you may want to err on the side of padding your emergency fund. And that means keeping your cash accessible by putting it into savings, not a CD.

What are your goals?

Because CD rates are up right now, you may be tempted to roll your money into a new CD. Doing so could mean snagging a higher interest rate on your money than what you'll get with a regular savings account.

But if your goal is to snag the highest return on your cash, then a brokerage account may be a better place for it. When you put money into a brokerage account, you have an opportunity to invest it. And that could mean snagging double, triple, or quadruple the return you'll get with a CD.

Right now, for example, you might snag a 3% interest rate on a 12-month CD, which isn't a bad deal considering that your principal deposit is protected (assuming it doesn't exceed $250,000, and let's be real -- no one should be tying up more than that in a CD). Investing in a brokerage account does mean taking on some risk. But you might also be rewarded with a 6%, 9%, or 12% return on your investments, depending on the stocks you pick and how the market performs.

Make the right call

You may be inclined to roll a CD that comes due into a new CD because that's the easiest route to take. But before you do, think about whether you want easier access to that money, and also, whether you want to get a higher return out of it.

You may decide that rolling your cash into another CD is, in fact, your best bet. But do explore other options before making that choice.