How to Close a Certificate of Deposit

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In the past, when you opened a certificate of deposit account, you received an actual certificate and in order to close the account, you simply had to turn that certificate in at the bank holding the account. Banks no longer issue certificates, and nowadays, you can redeem a CD just by presenting a valid form of identification. However, if you try to redeem your CD too early, you may have to pay a penalty.

  • Locate the time deposit agreement you were given when you opened your CD. The front page of this document should list the maturity date. Generally, you cannot redeem your CD penalty-free prior to this maturity date. Though, after the CD reaches maturity, the account enters a grace period that may last for up to 10 days. If you do not close the CD within the grace period, then a new term begins, and you pay a penalty if you access funds before the next maturity date. If you cannot find your time deposit agreement, call your local bank and find out when the CD matures and how long the grace period lasts.

  • Present a form of government issued ID, such as a drivers license or passport, to the customer service representative at the bank from which you purchased your CD. If you know your account number, tell it to the representative. If you do not know the account number, the representative can find your CD using your name or your Social Security number. Tell the representative to redeem your CD.

  • Sign the CD account closure form or withdrawal slip. You can ask the representative to give you cash, a cashier's check or to electronically transfer funds from the CD into your checking or savings account. Review your transaction receipt to ensure you receive the full amount of the CD and any accumulated interest.

Tips & Warnings

  • If you are unsure as to how long you can afford to keep your funds tied up inside a CD, ask your bank about no-penalty CD options. Many banks offer CDs on which you can make one penalty-free withdrawal prior to the CD maturity date. However, the interest rates on these CDs are generally lower than on regular CD products.
  • When you make a withdrawal from a CD prior to maturity, federal law requires your bank to assess a penalty equal to at least seven days of interest, if you make the withdrawal during the first week that you own the account. Thereafter, banks can charge larger penalties and often charge penalties that amount to several months worth of interest, and some banks even charge principal penalties on premature withdrawals. When faced with a significant penalty fee, you may consider leaving the funds in the CD until maturity and using another source of funds to cover your short-term expenses.

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