Three-year certificates of deposit can guarantee interest on money you’re willing to lock away for three years. Right now, the average annual percentage yield, or APY, for a three-year CD is 4.14%, based on the banks we track at CNET. But to take advantage of today’s competitive APYs, you’ll need to lock in a rate soon. Experts expect rates to fall in the coming months.
What is a 3-year CD?
A three-year CD lets you earn a fixed return on your savings in exchange for locking up your money with a bank for three years. Usually, you’ll earn a higher savings rate than you would with a shorter-term CD, like a three-month CD.
Since CDs have a set return, you know upfront how much you’ll earn when the CD matures. When your CD term ends, you’ll receive the total deposit balance plus compound interest. If you don’t withdraw your funds within 10 days, the bank might automatically renew your CD. So, pay attention to the bank’s terms and mark your calendar so you remember when your CD term ends.
If you need to take money out of the CD before it matures, you’ll typically pay an early withdrawal penalty worth a few months of interest, depending on your bank.
CNET’s picks for the best 3-year CD rates
| Bank | APY | Min. deposit to open |
|---|---|---|
| MYSB Direct | 4.46% | $500 |
| Bread Savings | 4.25% | $1,500 |
| First National Bank of America | 4.65% | $1,000 |
| First Internet Bank of Indiana | 4.75% | $1,000 |
| BMO Alto | 4.60% | $0 |
MYSB Direct
- APY APY = Annual Percentage Yield.
- 4.46%
- Min. deposit to open
- $500
M.Y. Safra Bank Direct is a full-service bank that offers a range of checking, savings, money market and CD accounts depending on your needs. When it comes to CDs, MYSB Direct is a solid option since you’ll earn a competitive rate and there’s a wide range of terms to choose from. And you can use the bank’s online CD calculator to help estimate your return before opening an account.
However, the CDs require a $500 deposit. Another downside is that this bank charges a $5 monthly fee for select accounts. You can visit the local branch if you live in New York City or call 212-652-7200 during business hours. However, you can manage your account online.
M.Y. Safra Bank Direct is a full-service bank that offers a range of checking, savings, money market and CD accounts depending on your needs. When it comes to CDs, MYSB Direct is a solid option since you’ll earn a competitive rate and there’s a wide range of terms to choose from. And you can use the bank’s online CD calculator to help estimate your return before opening an account.
However, the CDs require a $500 deposit. Another downside is that this bank charges a $5 monthly fee for select accounts. You can visit the local branch if you live in New York City or call 212-652-7200 during business hours. However, you can manage your account online.
Bread Savings
- APY APY = Annual Percentage Yield.
- 4.25%
- Min. deposit to open
- $1,500
Bread Savings offers CDs and high-yield savings accounts, but both require a minimum deposit -- $1,500 and $100 respectively. CDs come with a few free services that are common among banks, but worth noting -- including incoming wire transfers, monthly maintenance and ACH transfers. Bread Savings is an online bank but can be reached at 833-755-4354.
Bread Savings offers CDs and high-yield savings accounts, but both require a minimum deposit -- $1,500 and $100 respectively. CDs come with a few free services that are common among banks, but worth noting -- including incoming wire transfers, monthly maintenance and ACH transfers. Bread Savings is an online bank but can be reached at 833-755-4354.
First National Bank of America
- APY APY = Annual Percentage Yield.
- 4.65%
- Min. deposit to open
- $1,000
First National Bank of America offers some of the best CD rates available with terms ranging from one to seven years. You can buy a CD online and are not limited to visiting one of its Michigan branch locations. Just make sure you won’t need to access the money before maturity; this bank charges some of the steepest early withdrawal penalties we’ve seen.
First National Bank of America offers some of the best CD rates available with terms ranging from one to seven years. You can buy a CD online and are not limited to visiting one of its Michigan branch locations. Just make sure you won’t need to access the money before maturity; this bank charges some of the steepest early withdrawal penalties we’ve seen.
First Internet Bank of Indiana
- APY APY = Annual Percentage Yield.
- 4.75%
- Min. deposit to open
- $1,000
First Internet Bank of Indiana offers high-yield CD terms ranging from three months up to five years. The rates are competitive, but it has a minimum deposit requirement of $1,000. You can open an account online or via the mobile app, and interest compounds daily and credits monthly. First Internet Bank of Indiana doesn’t offer specialty CDs, however, and its early withdrawal penalty for high-yield CDs is up to 360 days of interest -- which is on par for long-term CDs.
First Internet Bank of Indiana offers high-yield CD terms ranging from three months up to five years. The rates are competitive, but it has a minimum deposit requirement of $1,000. You can open an account online or via the mobile app, and interest compounds daily and credits monthly. First Internet Bank of Indiana doesn’t offer specialty CDs, however, and its early withdrawal penalty for high-yield CDs is up to 360 days of interest -- which is on par for long-term CDs.
BMO Alto
- APY APY = Annual Percentage Yield.
- 4.60%
- Min. deposit to open
- $0
BMO Alto is the online arm of BMO, offering competitive CD rates with no minimum deposit requirements and terms ranging from six months to five years. BMO Alto pays interest on CDs monthly.
However, BMO Alto doesn’t offer specialty CDs or a designated mobile app to manage your account. Instead, you’ll need to use the BMO Alto website. Since BMO Alto is separate from BMO bank, you can’t get help with your account at a physical location, but you can call 855-266-8100 for help.
BMO Alto is the online arm of BMO, offering competitive CD rates with no minimum deposit requirements and terms ranging from six months to five years. BMO Alto pays interest on CDs monthly.
However, BMO Alto doesn’t offer specialty CDs or a designated mobile app to manage your account. Instead, you’ll need to use the BMO Alto website. Since BMO Alto is separate from BMO bank, you can’t get help with your account at a physical location, but you can call 855-266-8100 for help.
Should I choose a 3-year CD?
A three-year CD may make sense if you have a big goal you plan to reach in a few years, like paying for a wedding or buying a car. This CD term can also hold a down payment on a home or retirement funds you don’t want to risk in the stock market.
Longer-term CDs, like three- and five-year CDs, are appealing because you can lock in a high interest rate to protect your earnings if rates fall. For instance, if you put $1,000 in a three-year CD with a 4.35% APY today, you’ll earn $136.26 in interest in three years, even if rates drop. But if rates increase in the next three years, you could miss out on a better return.
A three-year CD term also ties your money up for several years -- a drawback worth considering, said Ross Loehr, a certified financial planner. A long-term CD, like a three-year option, isn’t always the best place to store money you might need sooner, such as money you’ve earmarked for an emergency fund.
Above all, before opening an account, have a clear goal in mind before locking your money away for a few years. If you take the money out before the term ends, you’ll be on the hook for an early withdrawal penalty. If there’s a chance you’ll reach your goal sooner, consider a more flexible savings option.
How to get the best 3-year CD rate
Online banks generally offer the highest interest rates, mainly because they don’t have the overhead costs of maintaining physical branches. You can also open a share certificate -- the credit union equivalent of a CD -- which also tends to have above-average savings rates.
Pay attention to any requirements to get the best rate. Sometimes, banks offer the highest rates only to existing customers or those who can meet hefty minimum deposits. Most importantly, make sure you feel comfortable with the bank’s fees, which can eat away at any interest earnings.
Other flexible savings options to consider
A long-term CD, like a three-year option, isn’t always the best choice if you want to access your funds sooner. Here are alternatives that provide more flexibility.
A CD ladder
Three-year CDs can fit nicely into a CD ladder strategy. With this strategy, you open several CDs that mature at different times, giving you access to portions of your money more frequently.
For instance, you may spread $5,000 across five CDs: a six-month CD and one-, two-, three- and five-year CDs.
“The benefit of a CD ladder is term diversification,” said Marguerita Cheng, a certified financial planner at Blue Ocean Global Wealth. “You have flexibility with a CD ladder because your money matures at different terms. And if a better rate comes along, not all your money is tied up into a long-term CD.”
A short-term CD
A shorter-term CD might be optimal if you want a fixed interest rate but need more flexibility. Some banks currently offer higher APYs on six-month and one-year CDs than on three- and five-year CD terms. For example, the average APY for a six-month and one-year CD based on the banks we track at CNET is 4.89% and 5.05%, respectively.
With a shorter term, you’ll have access to your money sooner. However, APYs are based on keeping your money in the CD for a year. So choosing a short-term CD means you may earn slightly less interest, depending on the term.
A specialty CD
If there’s a chance you’ll need to withdraw your funds early to take advantage of higher interest rates, consider a no-penalty CD. This specialty CD lets you access your money before the term ends without a penalty charge.
Or, if you’re worried about being stuck with a low rate, you could choose a bump-up CD, which allows you to adjust your APY if rates go up.
Lastly, an add-on CD will give you the flexibility to deposit more money later instead of making the usual one-time deposit. But rates for this CD type aren’t usually as high, and banks may offer only one term option.
A high-yield savings account
Another option is a high-yield savings account, which lets you tap into your funds without penalty fees. The average APY on a high-yield savings account is 4.88%, based on the banks we track at CNET. If rates continue to rise, your high-yield savings rate will, too. CDs, in contrast, give you a fixed rate for the entire term.
“High-yield savings accounts can be an attractive option for individuals seeking liquidity,” said Thomas Codevilla, chartered financial analyst at SK&S Law Group. These accounts are particularly suitable for emergency funds or short-to-medium savings goals, Codevilla said.
Other experts agree. “Why would a person want to lock up their funds for three years to get 4% when they can get 5% without locking up funds?” said Bob Chitrathorn, vice president of wealth planning at Simplified Wealth Management.
However, since high-yield savings account rates are variable, when rates start coming down, you could earn less than you would have by securing a high rate with a CD.
How to open a 3-year CD
The process for opening a CD varies from bank to bank, but here’s what you can expect:
- Weigh your options. Before you open any new account, compare rates and requirements to see which CD is best for you by using CNET’s CD recommendations or searching for the best CD rates online.
- Provide the required information. Once you’re ready to open a CD, you can apply online or in person, depending on the bank. You’ll usually need to supply basic personal information, such as your full name, email, mailing address and Social Security number or Individual Taxpayer Identification Number.
- Fund your account. When your account is approved, you’ll make your one-time deposit. Some banks require minimum deposits of $500 or more. The vast majority of CDs allow you to make only one lump-sum deposit upon opening an account, so you won’t be able to make additional contributions later on. Most banks allow an electronic transfer, but you may also be able to write a check or make a cash deposit at a physical branch.
FAQs
Based on the banks we track at CNET, the average three-year CD APY is 4.14% (as of Feb. 14, 2024), but it’s best to compare rates across banks since higher CD rates are available for this term.
If rates increase while your CD is open, you’ll be locked into your existing rate until your CD matures.
If you want to withdraw your money before your three-year CD matures, you’ll likely pay an early withdrawal penalty, which typically equals a few months of interest. This can sometimes be worthwhile, particularly if rates rise significantly and you want to open a CD at a higher rate.
Just make sure you do the math before breaking a CD early. A CD calculator can help you determine if taking out the money sooner is the best decision.
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Methodology
CNET reviews CD rates based on the latest APY information from issuer websites. We evaluated CD rates from more than 25 banks, credit unions and financial companies. We selected the CDs with the highest APY for three-year terms from among the organizations we surveyed, and also considered rates for shorter terms if three-year terms were identical or unavailable.
Banks we reviewed
Alliant Credit Union, Ally Bank, America First FCU, American Express National Bank, Barclays, Bask Bank, Bethpage, BMO Alto, Bread Savings, Capital One, CFG Bank, CIT, CommunityWide Federal Credit Union, Connexus Credit Union, Discover, EverBank, First Internet Bank of Indiana, First National Bank of America, Forbright, LendingClub, Limelight Bank, Marcus by Goldman Sachs, MYSB Direct, NexBank, Popular Bank, Quontic, Rising Bank and Synchrony.
The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.
