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Renewing Your Certificate

Tuesday, 26 May 2020 04:00

Questions to Ask When Your Certificate Matures

Your savings certificate is coming due soon. You just received a renewal notice. What do you do next?

Think back to when you opened the certificate several months or years ago. You probably had a plan for that money. What was your long-term plan? What was your short-term plan?

Times have changed since you set up your certificate. What is your current life situation? What’s happening with your finances?

The certificate will automatically renew into a new certificate with the same or a similar term if you do nothing. If you’d like to make changes to your maturing certificate, you can do so during a 10-day grace period following your maturity date.

Here are some questions to ask yourself as you figure out what to do.

1) When will you need your money?
If you expect you’ll need your money in the next 3 to 6 months, then a short-term certificate might be a good option.

If you're saving for a purchase a little further down the road, you could go for a certificate with a longer term, such as 12 or 18 months.

If you don’t need the money for at least three years, for example, consider contacting one of our investment specialists to discuss options. And if you are looking at an even longer term, there are many investment options that can help maximize the growth of what you currently have on deposit.

Consider the savings or investment rates of return and length of term when deciding what is best for you. If you want to invest in something with different terms, now is the time to make a change.

2) How much cash do you need?
This is an important question, especially now. You have an opportunity to remove some or all the cash value without penalty. You didn’t have that chance a month ago.

You can keep some money in savings, such as a money market account, for flexible liquidity during uncertain times and reinvest the rest in a new certificate or a different investment option.

For students and parents counting on the 529 Plan to pay for the first years of college, they’ve seen values drop because of COVID-19. You might consider using your newly mature certificate money to help pay for school and let the 529 Plan’s value recover over the next year or two.

3) Are you looking for the best savings rate?
Usually, you’ll find better rates with longer terms. A 60-month certificate typically has better rates than a 3-month certificate, for example.

When you look at CAP COM’s current savings rates, note that CAP COM updates rates on Wednesdays, so you can check weekly instead of daily.

When shopping for rates, make sure you look at the fine print, especially on introductory offers. There are often promotional rates that might change or include fees or are tied to other actions, such as opening a checking account. Make sure you do thorough homework.

4) Does creating a “CD Ladder” make sense?
With your certificate that’s maturing, you can reinvest in more than one new certificate in what’s known as a “CD Ladder.” With this concept, you open multiple certificates with different maturity dates.

"When you ladder your certificates, you can access your funds at more frequent intervals,” said Ryan Chenot, a Certified CU Financial Counselor with CAP COM. “If and when rates go up, you can move the next certificate that's coming due to one with a higher rate."

Say, for example, that you need some of the money in a few months, more in about a year, and the rest in a couple years. You could renew your maturing certificate and distribute it into a 3-month, 12-month, and 24-month certificate.

As each certificate matures, you can decide whether to roll it into a new CAP COM certificate or withdraw the money into your savings. One of the best things about this strategy is that you have flexibility when it comes to choosing which certificates to include.

“In uncertain times, laddering short-term certificates can help you gain additional dividends while having access to your money if a need arises,” said Kyle McKenna, a Branch Advocacy Specialist at CAP COM. “If possible, keeping additional funds in a Money Market account gives you access to your money any time. While certificates tend to earn greater dividends, the liquidity of a Money Market allows you to take advantage of investment opportunities quickly, and it is a great place to park emergency funds.”

5) How do you make changes?
If you are OK with the certificate renewing automatically to the same or similar term, you don’t have to do anything. Most people choose this option.

If you want to reinvest in a new CD, follow these steps during your 10-day grace period:

  1. Consider answers to the questions outlined here
  2. Check our current rates
  3. Call us at (800) 634-2340 OR log in to online banking and complete the Certificate Renewal Form under “Secure Forms”