The Best 3-Year CDs: Earn Up to 4.05%
Three-year CDs give you a flexible way to achieve midrange savings goals.
The best 3-year CDs are a smart option for savers looking to achieve longer-term saving goals.
Whether you're planning a dream vacation, a down payment on a second home or want money earmarked for something down the road, CDs give you a risk-free way to reach your goals.
The only thing to keep in mind is that current returns don't outpace inflation. So, make sure CDs are part of a layered strategy that also includes investments. In turn, you can minimize inflation's impact.
How to find the best 3-year CD rates
Currently, 3-year CDs help you earn a higher return than a traditional savings account. Even as diesel prices eventually raise the cost of everyday goods, having a savings account that earns more can help shelter your cash from inflation.
However, CDs work best when you can park the money and forget about it. If you need to withdraw before your term expires, your bank or credit union will close the CD and assess a fee.
These fees can offset the interest you earn, so only lock in longer-term CDs if you're confident you won't need the money before the maturity date.
In the meantime, here are the best three-year CD rates I found:
Account | APY | Min Deposit | Early Withdrawal Penalty |
|---|---|---|---|
4.05% | $500 | 6 months of interest | |
3.95% | $2,500 | 6 months of interest | |
3.82% | $1,000 | 3 months of interest | |
3.75% | $500 | 6 months of interest |
How do CDs work?
With a CD account, your cash is locked away for a fixed period, typically one to five years, unless you’re prepared to pay a fee to withdraw it early.
Because of early withdrawal fees, CDs aren’t a good place to park cash you plan to spend in the coming months, nor do they make good emergency funds.
However, they're good options if you’re trying to save for a future purchase or event and want to grow your cash without accessing it.
You’re guaranteed a fixed return on your cash so that the rate won’t fluctuate based on market conditions. This is both a good thing, as you get certainty, but also a possible problem, in case rates elsewhere shoot up, and you can't benefit.
As with other savings accounts, they're a good option for those who value risk-free returns, as you aren’t riding the waves of the stock market. In addition, most CD accounts are FDIC or NCUA insured, depending on whether they’re opened through a bank or credit union, so your cash is safe, even if your bank or credit union closes.
FDIC insurance protects up to $250,000 per account ($250,000 per person in a joint account), while NCUA insurance protects up to $250,000 per credit union member.
Pros of 3-year CDs:
- CDs offer guaranteed returns on deposits
- Fixed rates on CDs mean that even if rates fall, the APY on your account will remain the same
- Most CD accounts from banks and credit unions are federally insured for up to $250,000
- Since you can only withdraw funds when your CD account matures, you won't be tempted to spend your money elsewhere
Things to consider with 3-year CDs
- No liquidity: Accessing funds from a CD account isn't as easy as with a savings account. If you need to withdraw funds from a CD before the maturity date, you'll be charged a fee, which will likely offset any interest earned
- Money can't be added to a CD once it's been opened, in most cases
- CDs have a lower earnings potential compared with stocks or mutual funds
- Fixed rates on CDs also mean that if rates increase, you'll miss potential earnings
- Current rates are not high enough to outpace inflation, and high-yield savings accounts could offer better rates of return
Use the tool below to explore some of today's top savings offers, powered by Bankrate:
Which CD term is right for me?
CDs are excellent savings vehicles if you want to place your money, then forget about it. However, with a wide range in terms, it's vital to strike a balance between earmarking money for future goals and having some cash on hand to pay for unexpected expenses.
Your savings goal can influence the term you choose. If you want a shorter option, but also gives you access to your cash fast, a 1- or 2-year CD might be a wise choice.
Meanwhile, if you have larger savings goals, such as helping a child with a down payment on a home or taking that dream retirement vacation, then a longer term ensures you lock in a higher rate now before the Fed could cut rates again in the future.
Lock in today’s yield while rates remain higher
The bad news is that inflation rose to the point where no matter which three-year CD you choose, you'll lose a little money since it won't outpace inflation.
That said, they still provide value. If you have a savings goal you want to achieve in a few years, I would still recommend one as part of a broader strategy that includes investing. This can reduce inflation's impact while helping you crush your savings goals.
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