Hello, I have a few questions on the maturity dates when it comes to certificate of deposits. Unlike a savings or money market account, I understand CDs have maturites, say 6 months, 1 year, or 60 months, etc. With that, what happens to the money you've deposited at the end of the term? Do you have to then put the money into a new account or does the term just automatically restart? Also, as far as taxes on interest go, are you taxed on interest at the end of the year just as you would with a regular savings account? If not, how does the tax situation with a CD differ? Thanks so much!
2007-05-10 11:20:36 · 4 answers · asked by commandercoolage 2 in Business & Finance ➔ Personal Finance
The CD is automatically renewed at the same term but with the new rate. Interest is paid at maturity and at the end of each year. It is taxable. If the CD has a term of less than a year and it overlaps a year end then interest is only paid at maturity. (At least with my bank) That confused me last year when one of my CDs was not on the 1099.
There is a grace period at the end of the CD term of 7 days. You can do anything you wish with the money at that point. After 7 days it renews.
Most CD have a penalty of 3 months interest if you close it early. This is true even if you have not even earned the interest yet. Bank of America has a special CD at a little lower rate that does allow you to close it early. It may just be a short term promotion.
2007-05-10 11:27:42 · answer #1 · answered by Barkley Hound 7 · 0⤊ 0⤋
usually the bank sends you a notice when your CD is approaching maturity, giving you until a certain date to notify them if you do not want the money to be reinvested for another term. if you do nothing, they restart you automatically. taxes on a CD are just like a regular savings account--at the end of the year the bank sends you a 1099 form with your total interest and you are supposed to include that when you file your taxes.
2007-05-10 23:51:53 · answer #2 · answered by njyogibear 7 · 0⤊ 0⤋
Usually you will have notification a few days ahead of the mature date and a choice as to whether to leave it there, and it will rollover into a new CD or to take it out and start somewhere with a better interest rate. In January or Feb. of every year you will get a I 1099 from the bank showing the interest you got from that CD. It will be for a whole year.
2007-05-10 11:28:33 · answer #3 · answered by sillyputty 2 · 0⤊ 0⤋
Terms of cd's vary during the year so when your cd hits maturity you'll have to open another. The interest is interest income. You'll receive a statement at the end of the year to do your taxes with. You'll get taxed at whatever income tax bracket you are in.
2007-05-10 11:32:10 · answer #4 · answered by Dan M 2 · 0⤊ 1⤋