Do you have a short-term savings goal you need to reach? A certificate of deposit can help you get there. They're risk-free savings vehicles, allowing you to deposit your money and earn a higher rate of return than inflation.
Now that the Fed's rate hiking campaign is over, the rise in CD rates has come to an end. If you act fast, however, you can still lock in an impressive rate.
Currently, many of the top-yielding CD accounts still have rates just above or around 4%. So, if you’re saving for an upcoming purchase, or just looking for a fixed and safe return on your cash, opening a 3-year CD account could be a smart option. Just make sure you won’t need access to your money before the CD's maturity date.
Best 3-year CD accounts
Here's a look at the best 3-year CD rates:
Account | APY | Min Deposit |
|---|---|---|
4.28% | $1,000 | |
4.01% | $500 | |
4.00% | $0 | |
4.00% | $200 | |
4.00% | $1,000 | |
3.95% | $5,000 | |
3.80% | $1,000 | |
3.75% | $500 | |
3.50% | $2,500 |
What is a CD account?
With a CD account, your cash is locked away for a fixed period of time of typically 1-5 years, unless you’re prepared to pay a fee to take it out early.
Because of those early-withdrawal fees, CDs aren’t a good place to park cash you plan on spending in the coming months, nor do they make good emergency funds. They are good options, however, 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 the rate won’t go up or down based on market conditions, which is both a good thing as you get certainty, but also a possible problem, in case rates elsewhere shoot up and you don’t benefit.
Like other savings accounts, they are 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
- CDs offer guaranteed returns on deposits
- Fixed rates on CDs mean that even if rates fall, the APY on your account will remain consistent
- 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
Cons
- No liquidity: Accessing funds from a CD account isn't as easy as with a savings account. And if you need to withdraw funds from a CD account before the maturity date, you'll be charged a fee, which will likely offset any interest earned
- Money cannot be added to a CD once it has been opened, in most cases
- CDs have a lower earnings potential compared to stocks or mutual funds
- Fixed rates on CDs also mean that if rates increase, you'll miss out on potential earnings
- Rates may not be high enough to outpace inflation, and high-yield savings accounts could offer better rates of return
Which CD term is right for me?
CDs are excellent savings vehicles if you want to place your money someplace then forget about it. However, with the wide range in terms, it's vital to strike a balance between earmarking money for future goals, while 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 that helps you outpace inflation but gives you back access to your cash promptly, a one or two-year CD might be a wise choice.
Meanwhile, if you have larger savings goals like helping your children 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.
Bottom line
Now is a good time to lock in CD rates while they remain high. Before doing so, however, make sure to choose an account with a maturity date suited to your financial needs.
If you're considering opening a 3-year CD to save for a future purchase or event, you can use our savings calculator to determine just how much your money will grow over time, depending on the APY of the account and the size of the deposit made.
Related Content
-
Stock Market Today: Dow Adds 485 Points After Trump's Tariff DelayThe White House said it will postpone tariffs on automotive imports from Canada and Mexico for one month.
-
Why Abolishing Florida Property Taxes is ProblematicProperty Taxes A bold proposal that aims to eliminate property taxes in the Sunshine State has roused concerns from economists, and rightly so.
-
Save 73% On Starz With This Limited Time DiscountStarz currently offers two exceptional deals. Pay only $3 per month for three months or save 61% on a six-month membership.
-
10 Ways to Refine Your Financial Plan for a More Secure FutureSignificant benefits throughout the rest of the year can be had if you take some time now to revisit your financial plan and adjust accordingly.
-
Is a Long-Term CD the Best Option for Saving?CDs offer good rates and guaranteed returns. However, are they the best option for longer range savings goals?
-
College Grads: This Is What Hiring Managers Are Thinking (But Won't Admit)Hiring managers share the attitudes, questions and other issues that could turn off an interviewer — and some of these things they would never admit if asked.
-
How Financial Advisers Can Share Their Clients' Good WordsFinancial professionals must follow strict regulations when they use written testimonials and endorsements by their clients to market their business.
-
Retire in Thailand Where 'The White Lotus' Was FilmedYou can retire in Thailand without the hit show's murder and mayhem. Here is how to find real estate bargains and live large with a lower cost of living.
-
Private Jets Are Within Reach for Wealthy RetireesRealizing an adult fantasy like booking a private jet doesn’t come cheap. But so what?
-
Five Top Insurance Scams to Watch Out ForScammers are always looking to take advantage of unsuspecting people, and insurance issues are prime targets. Here's how to avoid falling victim.
