Compare 3 year CD Rates

How do I compare CDs rates?

In addition to looking at the best interest rates, you should also weigh other important factors including:

Know what’s in store for your money with the help of a CD calculator

Where can I find the highest CD rates?

Online banks typically offer the highest CD rates available, but many credit unions offer competitive rates as well. Nationwide brick-and-mortar banks tend to offer comparatively low CD rates, though some regional banks provide CDs with relatively high rates. Finding the highest CD rate also comes down to how long you want to lock your money away for.

Are CD rates worth it?

Yes, locking your money away is often worth the higher interest rates you’re unlikely to find with other accounts. However, CD rates have plummeted due to the pandemic, so now might not be the best time to invest. History suggests that that interest rates will rise, so it might be a smart move to wait until the pandemic is over before opening a CD.

What is a CD?

A certificate of deposit is a type of savings account that has a pre-determined fixed rate and term. You agree to your institution’s advertised rate when you open your CD. But you can’t easily access your money until the term expires. Many banks offer terms of six months to five years or more.

Can I add and withdraw money from my CD?

You can only deposit money when first opening your CD — you can’t top it up. You can only withdraw money from your CD with no penalty after your term ends. You can choose to reinvest a portion or all of your money into another certificate of deposit or withdraw your balance. But if you withdraw funds before the CD’s maturity date, you may have to pay an early withdrawal penalty that can equal the interest your money has earned over three months or more. If you think you might need to withdraw money, consider opening a no-penalty CD or savings account instead.

Are CDs safe?

Yes, Your CDs are safe as long as they are kept with an FDIC-insured institution. In general, CDs are insured for up to $250,000, though some banks offer an even higher limit.

11 Types of CDs

Here are the different types of CDs you can invest your money in:

1. Brokered CDs. You buy brokered CDs through a brokerage firm instead of a bank. You can typically lock in a higher CD rate than you would with a bank or credit union. But these CDs aren’t federally-insured and broker fees could eat into your earnings.

2. No-penalty CDs. The biggest drawback to a regular certificate of deposit is early withdrawal penalties. With a no-penalty CD, you don’t pay a fee if you pull your money out early. But these accounts typically have lower APYs than regular CDs and you may have to withdraw your entire account balance.

3. Jumbo CDs. These CDs are “jumbo” because they have opening deposits of $100,000 or more. They typically have higher APYs than regular CDs, although this isn’t always the case.

4. IRA CDs. With an IRA CD, you open up an IRA with a bank or credit union and have all the money in that account put into a CD. It offers a guaranteed return, but it shouldn’t be your only retirement account.

5. High-yield CDs. These CDs have higher rates than regular CDs. They’re typically offered by online-only banks with lower overhead.

6. Bump-up CDs. CDs have locked-in rates, which can be good or bad depending on market performance. With a bump-up CD, you can elect to be “bumped up” to a higher CD rate if rates increase during your term. But these CDs typically have lower APYs than regular CDs, so market rates may need to increase significantly for it to be worthwhile.

7. Variable-rate CDs. These CDs act similarly to savings accounts where the rates automatically increase or decrease depending on market fluctuations. A variable-rate certificate of deposit may be a good idea if you think interest rates will rise, but you could lose out on growth if they fall.

8. Negotiable CDs. These CDs are ideal for institutional investors because they typically require deposits of $1 million or more, although some may have minimum deposits as low as $100,000. You typically can’t access money in a negotiable CD before maturity, but you can sell it on the secondary market if needed.

9. Business CDs. Open a traditional or high-yield CD for your business and put your company on the path to meeting its goals.

10. CD ladders. This isn’t a type of CD, but rather a strategy you can use when buying CDs. Instead of putting all your money in one CD, you spread it out over multiple CDs with different terms, that way you get access to your money on a rolling basis.

11. Add-on CDs. These CDs let you continue contributing to your investment throughout its term. However, this type of CD can be hard to find, and banks that do offer this option generally impose restrictions.

The pros and cons of investing in a CD

Compare the pros and cons of investing in a certificate of deposit to see if it’s the right move for you.

Is a certificate of deposit right for me?

Here are some potential questions to ask yourself to determine if a CD is right for you:

• Do I have an emergency fund in place? If you already have some type of rainy day fund, you can rely on it if you need money before your CD matures. If you don’t already have one, consider putting three to six months’ worth of expenses in a savings account before you open a certificate of deposit.
• How much money do I have saved? You’ll typically need at least $500 to $1,000 to open most CDs, although some banks may require deposits as low as $0 or as high as $10,000. For short-term CDs, it’s okay to lock away smaller amounts of money — say $500 or more. But for long-term CDs, you’ll get the most bang for your buck if you save up at least $1,000 before you open the account.
• How soon will I need the money? Generally, you’ll earn a higher interest rate the longer you lock your money away. If you’ll need your money in less than a year, you might find higher rates with high-yield savings accounts than a three or six-month certificate of deposit.
• Will I need to access my money before the CD term expires? If you know you won’t need your funds until a specific date, a CD can be a great way to lock in a high interest rate. But if you’re not quite sure when you’ll need your money, you may want to use a CD ladder so you have frequent access to your money or skip using a certificate of deposit altogether.

How do I earn interest with a CD?

A CD gives you a fixed interest rate in return for investing your money for a fixed amount of time. For example, if you opt for a 12-month CD, you lock away your funds for one year and you can’t withdraw the money. In return, your bank awards you a competitive interest rate that’s traditionally higher than a savings account.

You can elect to receive interest payments monthly or all at once after your CD reaches maturity. You can often elect which US bank account you’d like to receive your interest payments into.

What is the average CD rate?

Although rates vary by provider, here’s the national average according to the Federal Deposit Insurance Corporation (FDIC) as of June 2021.

Is a certificate of deposit taxable?

Yes, you’re required to pay taxes on the interest you earn. Like traditional savings accounts, the interest your CD attracts is reported to the IRS. Your bank will send Form 1099-INT for any account for which you’ve earned at least $10 in interest.

The interest you earn is taxed at the same marginal tax rate that applies to the rest of your income. If you receive interest after your CD reaches maturity, you’ll claim the interest in the financial year that your account matures and you receive your interest.

Compare savings accounts based on your tax situation

Certificate of deposit alternatives

A CD isn’t your only option when it comes to saving money. A savings account, treasury bond or money market account may make more sense based on your needs and goals.

CDs vs. savings accounts

Money market vs. CDs

Bottom line

If you have the time and money to lock away your savings for higher interest rates over a term of six months to five years or more, look into a certificate of deposit. These safe investment tools guarantee a return on your investment, though with a potential disadvantage of penalties and fees if you’re not able to wait until your CD fully matures.

If you decide to open a CD, shop around for the best CD rates, features and fees from reputable banks and credit unions before signing up.

Common questions

• How do I close my CD?

  When your CD reaches maturity, you can withdraw all of your funds as you would with a traditional bank account. Your bank may offer an option for you to reinvest some or all of your balance at a stronger interest rate. Read the terms and conditions of your CD or speak with a representative to learn what maturity means for your money.

• Why do I need to give notice to withdraw funds from my CD?

  When you sign up for a CD, your bank counts your CD’s amount as part of its on-hand cash reserve. Your bank uses this reserve to pay out its customers’ many withdrawal requests and other transactions.

  If you request to withdraw your funds before your CD’s maturity date, that money could strain the bank’s cash reserves. It’s why many banks require at least seven days’ notice before allowing withdrawals, especially for amounts of $5,000 or more. However, in cases of extreme financial hardship, your bank may waive this rule.

• Can I borrow against my CD?

  Yes, some banks and credit unions allow you to use your CD as collateral for a personal loan. This is usually cheaper than paying early withdrawal fees on your CD. You can learn more with our article on how CD loans work.

• What's the relationship between the federal interest rate and my CD?

  The federal interest rate is a factor banks use to determine their own interest rates on a range of financial products. The federal rate aims to keep inflation at 2%, which means an interest rate of 2% or weaker could mean your investment won’t keep up with inflation.

  Certificates of deposit, like other investments, are ideal when federal interest rates are high. But in periods of low interest rates, you might want to look into other types of investments offering stronger rates of return.

• Is now a good time to invest in a CD?

  It depends on the market. If federal interest rates are high, a certificate of deposit should reflect a higher interest rate that you’ll find with an everyday or traditional savings account.

• My parent isn't a resident of the US. Can they open a CD?

  It depends on the bank. Most allow you to open a savings account even if you’re not a resident of the US. However, banks reserve the right to deny your application if you aren’t able to supply documents or information it requires.

• Will I be able to choose when interest is paid into my account?

  It depends on how long of a term you’re signing up for. Shorter CDs (under one year) usually pay interest upon maturity. With longer CDs you’re able to choose between monthly, biannual or annual interest payments. When shopping around, keep in mind that some banks will charge different interest rates depending on how often interest is paid out.

• Is it possible to calculate exactly how much I'll earn?

  Yes. You can use our CD calculator to find out how much interest your CD will earn.