This CD Mistake Could Cost You Hundreds Every Year

Opening a certificate of deposit (CD) feels like a safe move. You lock in an interest rate, let the money grow, and collect your earnings when the CD matures.

Simple enough -- except there's one more step that some people skip, costing themselves hundreds of dollars every year.

How auto-renewal can cost you

When a CD matures, most banks automatically roll it over into a new CD at whatever rate they're currently paying. You usually have a short grace period -- often seven to 10 days -- to make any changes. Miss it, and you're locked in for another full term.

And the new rate is rarely the best one available.

Your bank should notify you by mail or email when your CD is about to mature. Still, you might miss it or ignore it. (I've scrapped my share of bank mail, assuming it's just another statement.)

How much money could you miss out on?

Say you put $20,000 in a 1-year CD with a promotional APY of 4.00%. When it matures, the promo is over, and the same CD earns 1.52% APY (the current national average).

Here's what you'd miss out on if you let the CD renew:

• Earnings in year one (4.00% APY): $800
• Earnings in year two (1.52% APY): $316

You'd earn $484 less from the new CD -- just because you didn't shop around for better rates. Over the course of years, you'd end up leaving thousands of dollars on the table.

Check out some of the best CD rates available today -- before rates drop again.

What to do instead

A few simple steps will keep you from getting stuck with low interest rates.

1. Mark your maturity date as soon as you open a CD

Put it in your phone calendar with a reminder set two weeks beforehand. That gives you time to shop around before the grace period ends.

2. Compare rates

Cast a wide net when you're searching for new CDs. Credit unions and online banks often have better rates than traditional banks.

3. Make an exit plan

When your CD matures, you may decide there are better things to do with your cash than put it in another CD. Maybe you'll want to invest it in stocks, or keep it in savings so you can withdraw it whenever you want.

In any case, you don't want your cash to sit in a low-rate account. So think about your next move and prepare now.

Some high-yield savings accounts pay about the same APY as the best CDs right now. So even if you cash out, you can keep earning hundreds in interest each year.

Plus, it's never a bad time to earn more money on your savings. Check out our list of the best high-yield savings accounts today to start earning more interest now.

Set it and don't forget it

Auto-renewal isn't always a bad thing. Maybe your bank will still offer high rates when your CD matures. But you should always explore your options -- and remember that loyalty doesn't pay.