Can you lose money in a CD? What happens if you forget about an old CD account

Certificates of deposit (CDs) are a great way to save money if you want a guaranteed return over the long term.

The problem with CDs is that you commit when you open one. You have to promise to keep the money that you deposit in the account for a set time.

Often, you’ll open a CD with a term measured in years rather than months.

When you’re waiting for such a long time before you can make a withdrawal from your CD, it’s easy to forget about the account.

What happens when you forget about a CD, and how can you get your money back?

How you might lose an old CD

There are a few common ways that people lose their old certificates of deposit. Sometimes, banks merge or are acquired, and account records can get lost in the shuffle. In other cases, people inherit CDs from relatives but are unaware of their existence, or simply forget about accounts they opened years ago. In these situations, it is important to identify and verify the rightful owner of the CD before any funds can be claimed.

1. The bank was acquired

One common way to lose track of your bank accounts, including CDs, is when a bank is acquired.

Banks are like any other business. They compete with each other, merge with each other, and buy each other out.

During these processes, companies such as financial institutions act as intermediaries in managing and transferring accounts, ensuring that assets are safeguarded and can be recovered by account holders.

If your main bank is bought by another financial institution, you’ll probably know about it. The sign on your local branch will change, you might get new checks or a new debit card, and so on.

That said, if you only have a CD at a bank that’s acquired, it’s easy not to be aware of the changes.

You might get a letter in the mail announcing the acquisition, but it’s easy to miss that kind of thing.

By the time you remember that you had a CD at the bank, you’ll go looking for a branch only to find that the bank doesn’t exist anymore.

If a bank is acquired and the bank that bought your bank is bought by an even larger institution, things can get complicated, and it can be hard to track down your money.

2. An unknown inheritance

This isn’t forgetting an old CD so much as it’s not knowing about a CD you owned in the first place, but this happens more often than you’d think.

When you open any type of bank account, including a CD, you’ll be asked to name beneficiaries.

If you pass away, the money in the account will be given to the beneficiary.

If one of your loved ones dies, it will be up to the executor of their estate to go through their bank records and wills and make sure that everyone knows about the things that have been bequeathed to them.

A relative may have left funds in a CD under your name and you may not have been notified of it promptly.

In such cases, heirs or executors may need to file the appropriate documentation with the bank or state to claim ownership of the inherited CD.

3. You forgot

It happens.

You open a CD for a period of a few years and stop thinking about it.

Maybe you used a different bank than usual because it offered a better rate.

Whatever causes it, many people forget about the CDs that they open.

What happens to CDs that are left alone?

CDs are long-term bank accounts. Banks expect people to leave them alone for the most part.

This is especially true for CDs with long terms, such as five years.

Generally, banks will only expect to hear from CD holders when a CD matures, as that is the opportunity to make withdrawals, deposits, or other changes to the account. The process of escheatment, where unclaimed assets are transferred to the state, is governed by state and federal law, which mandates this transfer after a certain period of inactivity.

Automatic renewal

At most banks, if you don’t make any changes to a CD when it matures, the bank will roll your balance automatically into a new CD.

The new CD will have the same term as the original one and earn whatever the market rate is.

This means your CD could keep earning interest for years without you even knowing about it.

Escheatment

Eventually, the bank may try to reach out to the account holder to see why no changes have been made to the CD after multiple renewals.

If the bank isn’t able to reach you because it doesn’t have contact information or the contact information is out of date, the account will be escheated.

Escheatment transfers the ownership of abandoned property, such as a CD, to the state.

In the U.S., different states have different laws about escheatment.

When a CD is escheated, the state will hold it for a set period of time, giving you an opportunity to claim the account. States provide resources such as online databases and official records to help individuals locate and claim unclaimed property.

If you don’t claim it within a set period of time, the state will take full ownership of the funds.

What to do if you forgot about an old CD

If you realize that you’ve forgotten about an old CD, there’s a good chance that you can still get your money back.

Start by searching through various channels, such as banks and state databases, to locate any forgotten or unclaimed CDs.

Here are the things that you should do:

1. Call the bank

If you know the bank that held the CD but don’t have any of the account information, just give the bank a call.

Explain the situation and provide whatever details you can:

• Personal information
• When (approximately) you opened the CD
• How much you deposited
• What branch you visited to open the account

The bank may need to review your information to verify your identity and the security of the account before proceeding.

The bank may be able to track down your account using the information that you provided.

If it can’t, the person you’re working with should at least be able to point you in the right direction for the next steps that you should take.

2. Use the FDIC database

If you remember about an old CD, only to find that the bank you used doesn’t exist anymore, all is not lost.

Remember, the Federal Deposit Insurance Corporation (FDIC) guarantees bank accounts, up to a balance of $250,000 per depositor, per account type. FDIC insurance applies to CDs, so your money should still be out there. CDs are federally insured up to the specified limits, providing additional security for depositors.

One of the things that the FDIC does to make sure that depositors don’t lose money is to help banks acquire failing banks and take over the management of their accounts.

Depending on the bank that you used, you might find that there is a long trail of bank acquisitions, making it difficult to figure out which bank actually has your CD.

The FDIC website includes numerous tools that you can use to track the history of a bank and the banks that it merged with or was acquired by.

By following this trail, you can likely find the bank that has your CD.

3. Check unclaimed property databases

If it’s been a long time since you opened your CD, the bank might have informed the state that you’ve abandoned the account.

If this happens, you’ll need to get in touch with your state’s government to claim the money.

Most states operate unclaimed property websites where you can search for any unclaimed property in your name.

Check your state’s website for a database and search for your name. It can’t hurt to search for your spouse’s or loved ones’ names, either. Maybe they have some old accounts they don’t know about.

If you find something on your state’s unclaimed property website, follow your state’s process for claiming those funds. Be cautious of companies or services that charge a fee to help you claim unclaimed property—this process is usually free when done directly through official state resources.

What if you have an old paper CD?

Before much of the financial system was made electronic, financial institutions would issue paper certificates for things like stocks or CDs.

If you find an old paper CD, your best bet is to get in touch with the bank that issued it.

The bank will be able to tell you whether the account is still valid or if the money has been escheated.

Do note that losing a paper certificate does not mean that you’ve lost your money. Deposit insurance coverage may still protect the funds in old paper CDs, depending on the circumstances.

In most scenarios, the best thing you can do is ask the bank for help. Most banks want to work with their customers and make sure that they get their money, so it can’t hurt to ask.

Discover new certificate of deposit opportunities

If you’re revisiting the realm of CDaccounts, either by remembering an old account or considering where to safely grow your savings next, it’s the perfect time to explore the latest CD products available. Many new CD products offer competitive yields compared to traditional options, making them attractive for those seeking higher returns.

The banking world has evolved, offering more flexibility, competitive rates, and features tailored to meet diverse financial goals and timeframes. You can purchase CDs online or through your bank. Whether you’re looking to reinvest your discovered funds or diversify your savings strategy, understanding new options can lead to more informed decisions.

Current CD rates

Conclusion

Certificates of deposit are powerful savings tools, but it’s easy to forget about them over the years.

If you realize that you’ve forgotten about a CD, your money isn’t gone for good.

Take steps to reclaim your money and keep it working for you.

Frequently asked questions

Is it possible to lose money in a CD account?

It's possible to lose money in a CD if you withdraw the funds before the term ends, as early withdrawal penalties can sometimes exceed the interest earned. Additionally, you could lose money if the bank fails and your deposit is not covered by FDIC or NCUA insurance.

Are CDs safe if the market crashes?

Yes, CDs are a very safe option during a market crash. They are not tied to the stock market, so their value and the fixed interest rate you locked in are unaffected by market downturns. As long as your CD is with a federally insured bank or credit union and your total deposit is within the $250,000 insurance limit, your money is protected.

What is the downside of a CD?

The primary downside of a CD is its lack of liquidity. Because you agree to lock up your money for a set period, you will have to pay an early withdrawal penalty if you need to access your funds before the term ends.