How to Cash a Certificate of Deposit

A certificate of deposit, or CD is a type of deposit account that generally earns higher interest than a standard savings account. With a traditional CD, you deposit a fixed investment for a fixed amount of time at a fixed interest rate. This time frame can range anywhere from three months up to five years. Once the CD reaches the maturity date, you can do nothing and allow the CD to roll over for another term, or you can cash it out. However, some banks offer a variety of CD products with a range of non-traditional features like little or no penalty for early withdrawals and variable interest rates based on either a pre-set schedule or tied to the performance of a specified market index like the S&P 500.

Determine the certificate of deposit maturity date. Federal banking regulations require banks to send CD owners notice that a CD is reaching maturity. This is sent out 30 days before the maturation date or 20 days before the grace period expires. You can also call the bank and ask when your CD matures.

Visit the bank where you opened the CD. If it's a large chain, you may be able to cash the CD at any one of its branches nationwide. Bring with you any deposit certificates or receipts you received when you initially opened the CD. Also ensure that you have a photo ID with you. Ask to speak with a bank employee that handles certificates of deposits. Inform the employee that you'd like to cash out the CD.

Present the certificate of deposit account information to the bank employee. This includes the documentation you brought with you. If you can't find any receipts for the CD, the bank should be able to find it for you using other personally identifiable information such as your Social Security number.

Discuss the impact of cashing out the CD with the bank employee. Depending upon your situation, the bank employee may encourage you to leave the cash in the certificate of deposit or he may suggest a different investment product for you to consider. If his suggestions don't fit into your plans, simply reiterate your intention to cash out. Sign the required paperwork. The bank will need your signature to confirm that you want to cash the certificate of deposit. You will receive the original amount of your deposit plus interest minus any fees, such as the penalty fee. You can choose to deposit the funds into your checking or savings account, or walk away with the cash.

Make sure you understand the penalty you can incur for closing a certificate of deposit early. Ask the bank employee to explain it thoroughly if you're uncertain. This will help you determine if it makes more financial sense to cash the CD out, or roll it over for another term. Penalties can equal 30 to 90 days worth of interest for a CD that's 12 months or shorter. Longer-term CDs can incur stiffer penalties. Pay the penalty if you've exceeded your grace period for cashing out the certificate of deposit. This grace period generally runs 7 to 10 days past the maturity date. The bank will deduct the penalty from the amount of the CD and give you the difference.

Never ignore mail from a financial institution regarding your accounts. You could inadvertently miss the maturation date of a certificate of deposit and lose the opportunity to cash it out penalty free.