How to Redeem CDs
In order to avoid paying any penalty fees, you should wait to redeem your certificates of deposit until those accounts reach maturity. However, some CDs have special provisions that allow for penalty-free withdrawals, in which case you can redeem your CD at any time without incurring any fees.
If you plan to use the money to fund a new account at the same bank, you can ask your bank to electronically transfer the money from the closed CDs, in which case you save yourself time and you save the bank employees from having to complete extra paperwork.
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Instructions
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Review your CD contracts to see whether any of your CDs allow for penalty-free withdrawals. Each CD contract must show a maturity date, and generally speaking you must wait until the day after the CD matures before you can actually access your money without paying a penalty. If you decide to withdraw money from one or more of your CDs prior to the maturity date, read the CD contract terms and conditions to find out exactly how much you must pay in terms of penalty fees.
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Go to your bank and provide a customer service representative with the account numbers of the CDs that you wish to redeem. If you cannot locate your CD contracts and do not remember the account numbers, you can verbally provide the customer service representative with your Social Security number and the employee can use that information to locate your accounts. Verify the amount of any applicable penalties before the representative actually closes the account.
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Sign the CD withdrawal slips and instruct the customer service representative to give you a check or cash or to electronically transfer the account proceeds into one of your other accounts. Take a copy of the account closure form and retain your copy of the CD agreement so that you have all of the necessary account information to file your taxes. If you have more CDs held at other banks, go to each bank and repeat the same steps to close those accounts.
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Tips & Warnings
If you cash in more than $10,000 of CDs held by a single institution within one business day, the bank representative assisting you must complete a Large Currency Transaction Report. In order to complete this government report, the representative must write down your name, physical address, Social Security number and details of the transaction such as the names of any other parties that stand to benefit from your cash withdrawal. LCTRs are sent to the Internal Revenue Service and kept on file to help the government combat terrorism and money-laundering activities. Allow yourself some extra time if you plan to take your CD proceeds as cash, as it can take several minutes to complete an LCTR.
If you cash in a CD that contains Individual Retirement Arrangement money with the intention of moving that money to a new IRA, instruct your bank not to withhold any money for taxes. If you do not make such a request, your bank automatically withholds 10 percent of the money to cover federal taxes. You must reclaim that money when you file your federal taxes. Additionally, you must redeposit CD IRA money into another IRA account within 60 calendar days of your withdrawal; otherwise, the IRS treats the withdrawal as a fully taxable distribution. When this occurs, you must pay income tax on the whole amount as well as a 10 percent tax penalty if you are under the age of 59 1/2.
