Note Notice

A note notice is distributed by a lender out to borrowers notifying them that notes, or securities that they have invested in, have matured. The notice includes the amount due and maturity date.

A note notice will be sent to certificate of deposit (CD) holders prior to the CD’s maturity date. A CD is a savings certificate and has a fixed maturity date and specified interest rate. While CDs are generally issued by commercial banks, they can also sometimes be bought through brokerage firms. CDs are insured by the FDIC for up to $250,000 per individual.

While there is no regulatory time frame for how far in advance a note notice must be sent out, the standard notification time is at least 10 days prior to the note's maturity date.

When a CD matures, investors have the option of withdrawing their funds, both principal and interest, or reinvesting them in another investment vehicle. If customers do not withdraw their funds upon a CD's maturity, most banks will automatically renew the CD investment for the same term at the quoted current interest rate.

CDs restricts holders from withdrawing funds until the maturity date. If investors withdraw funds prior to the maturity date, they would incur a penalty.

The premise behind CDs is that investors get a higher return in exchange for giving up liquidity. Generally, long-term CDs have higher interest rates than short-term CDs. This is for two reasons: first, there’s generally more risk associated with an investment that’s held for a longer period of time. Additionally, investors will not be able to access the funds they invest for a longer period of time. Because of this, they’re compensated with a higher interest rate.

The terms of CDs can vary, and there are many different kinds of CDs. CDs of less than $100,000 are called small CDs, while CDs for more than $100,000 are called large CDs or jumbo CDs. Most large CDs and some small CDs are negotiable. The term of a CD can range from one month to five years.

Some additional types include variable-rate CDs, which have an interest rate that is linked to the prime rate; fixed CDs, which have a fixed interest rate; callable CDs, which allow banks to call in or redeem the CD if paying the interest rate becomes a bad deal for them, and liquid CDs, which allow for early withdrawal but have lower interest rates in exchange for this liquidity.