Certificates of deposit, or CDs, are savings products that pay the customer interest in exchange for agreeing to leave their deposit with the bank or credit union for a fixed period of time. Most depository institutions offer a variety of CDs with different maturity dates; typically, the shortest ones will last three months while the longest ones range up to ten years, though five years is the longest term at most institutions. In theory, the longer the duration of the deposit, the higher the rate the institution is willing to offer. CDs are considered safe, conservative investments because their rate of return is pre-determined and guaranteed to remain locked for the full term. In addition, virtually all CDs are offered by FDIC-insured banks, or by credit unions insured through the NCUA . As a result, deposits of up to $250,000 are protected, even if the financial institution faces liquidity problems. Most CDs don't allow you to add funds after the initial deposit, making it a less favorable savings vehicle for those who wish to make periodic contributions. But CD accounts are well-suited for parking cash you won't need for a while and that you want invested reliably and essentially risk-free. Usually, CDs are set to automatically renew at maturity. But you'll be notified of the maturity date in advance and given the opportunity to tell the bank you'd like to do something different with the money, such as withdraw it or transfer it to another institution. Fortunately, if you miss the maturity date by a few days, most banks and credit unions afford a grace period of a few days during which you can still withdraw your funds without penalty. It's important to note that CD rates can vary significantly from one bank or credit union to another. Indeed, the top certificate rates nationwide are typically three and five times the industry average for a CD of the same duration. So it's critical you shop around.

When Is a 3-Year CD a Good Idea?

The main reason to consider a CD that's three years in length is because it fits your personal timeline. Maybe you know you can lock up the funds for that number of years because it's money for a student going to college further down the road than that, or its surplus savings you know you won't need to touch for a long time because you have other savings you can tap in the meantime. Another reason to buy a 3-year CD is if you are building a 5-year CD ladder , which involves buying an array of different CD terms, in yearly durations of up to five years, so that you always have on CD maturing every year. To create a 5-year CD ladder, you'll need one 3-year CD for the group.

How Are CD Rates Determined?

The rate paid on CDs is determined by each bank and credit union and involves their particular need for deposits and the time horizon of their deposit strategy. However, the actions of the Federal Reserve loom large in the equation. The federal funds rate , which is determined by the central bank's Federal Open Market Committee, influences how much banks have to pay in order to borrow from each other. That, in turn, influences how much individual depository institutions are willing to pay consumers for their deposit funds. When the Fed's rate is low, banks will offer lower yields on interest-bearing accounts. When interest rates go up, however, they tend to pay higher rates in order to attract customers.

What if I Need to Withdraw My Money Early?

To provide a disincentive to CD holders from taking their money out of the account before maturity, all banks and credit unions have an early withdrawal penalty policy. Withdrawing early will cause you to forfeit some of your interest earnings—three to 12 months' worth of interest is common—but the penalties vary widely by institution, with some harsh enough to eat into your original principal. Some banks and credit unions offer penalty-free CDs, although they typically offer a lower rate and may be "all or nothing" propositions. If that's the case, you would need to pull out your entire balance and close the account if you want to withdraw early. Because of their lower rates, no penalty-free options make the cut in our ranking of the top-paying nationally available 3-years CDs.

How Can I Join a Credit Union on the List?

Unlike banks, credit unions are created to serve the needs of a specific community. In many cases, that means restricting membership to the residents of a certain area or to the employees of a particular company or group of companies. However, some credit unions make it fairly easy for non-local individuals to join. For example, the institution may allow you to attain membership by making a donation to its foundation or a nonprofit in its community, or by joining a financial literacy or consumer protection organization like the American Consumer Council. The process of joining is also typically very easy, and it is often indistinguishable from the process of opening an account with a new bank. Being open to credit union membership is a smart move for CD shoppers, as many of the best nationwide rates are offered by credit unions.

Best 3-Year CD Rates for November 2023

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Luana Savings Bank – 5.37% APY

Term (months): 30
Minimum deposit: $2,000
Early withdrawal penalty: 6 months of interest
About: Luana Savings Bank was founded in 1908 in northeastern Iowa, and in addition to operating six Iowa branches, it serves nationwide customers online.

Prime Alliance Bank – 5.25% APY

Term (months): 36
Minimum deposit: $500
Early withdrawal penalty: 3 months of interest
About: Established in 2004, Prime Alliance operates one branch in metropolitan Salt Lake City, while also offering deposit products online to customers throughout the U.S.

SouthEast Bank – 5.25% APY

Term (months): 36
Minimum deposit: $1,000
Early-withdrawal penalty: 6 months of interest
About: Established in 2002, SouthEast has 14 branches across Tennessee and serves customers nationwide through digital banking and the AllPoint network.

Jovia Financial Credit Union – 5.25% APY

Term (months): 40
Minimum deposit: $100
Early withdrawal penalty: 9 months of interest
Membership: Anyone can join Jovia by agreeing to a free membership in the affiliated CrossState Foundation and keeping at least $5 in a savings account.

U.S. Senate Federal Credit Union – 5.23% APY

Term (months): 36
Minimum deposit: $1,000
Early withdrawal penalty: 6 months of interest
Membership: Anyone can join USSFCU by agreeing to a free one-year membership in the nonprofit American Consumer Council and keeping at least $5 in a savings account.

Lafayette Federal Credit Union – 5.10% APY

Term (months): 36
Minimum deposit: $500
Early withdrawal penalty: 12 months of interest
Membership: Anyone can join Lafayette Federal with a $10 membership in the Home Ownership Financial Literacy Council and $50 or more held in a savings account.

MYSB Direct – 5.05% APY

Term (months): 36
Minimum deposit: $500
Early withdrawal penalty: All interest (3 months minimum)
About: MYSB Direct is the online banking arm of M.Y. Safra Bank, which is headquartered in New York City and operates a single branch there.

DollarSavingsDirect – 5.00% APY

Term (months): 36
Minimum deposit: $1,000
Early withdrawal penalty: 6 months of interest
About: DollarSavingsDirect is FDIC-insured as an online division of Emigrant Bank, which dates back to 1850. Emigrant Bank is headquartered in New York.

My Savings Direct – 5.00% APY

Term (months): 36
Minimum deposit: $1,000
Early withdrawal penalty: 6 months of interest
About: My Savings Direct is FDIC-insured as an online division of Emigrant Bank, which dates back to 1850. Emigrant Bank is headquartered in New York.

Transportation Federal Credit Union – 5.00% APY

Term (months): 36
Minimum deposit: $1,000
Early withdrawal penalty: 6 months of interest
Membership: Anyone nationwide is eligible for membership with Transportation Federal Credit Union by joining the American Consumer Council.

Farmers Insurance Federal Credit Union – 5.00% APY

Term (months): 36
Minimum deposit: $1,000
Early withdrawal penalty: Complex formula with a minimum penalty of 6 months' interest
Membership: Anyone can join Farmers Insurance Federal Credit Union by agreeing to a free membership in the nonprofit American Consumer Council and keeping at least $5 in a savings account.

Newtek Bank – 5.00% APY

Term (months): 36
Minimum deposit: $2,500
Early withdrawal penalty: 6 months of interest
About: FDIC-insured since 1963 as National Bank of New York City, Newtek is the bank's 2023 rebranded identity, which operates one branch each in New York and Miami while serving nationwide customers online.

The Federal Savings Bank – 5.00% APY

Term (months): 36
Minimum deposit: $5,000
Early withdrawal penalty: 12 months of interest
About: The Federal Savings Bank was founded in Chicago in 2000. In addition to operating two metro Chicago branches, the bank offers deposit products online to consumers across the U.S.

Popular Direct – 5.00% APY

Term (months): 36
Minimum deposit: $10,000
Early withdrawal penalty: 12 months of interest
About: Popular Direct is the online-only arm of Popular Bank, the U.S. banking subsidiary of Popular, Inc., which was founded in 1893 and serves banking customers in the U.S., Puerto Rico, and the Caribbean.

Skyla Credit Union – 4.95% APY

Term (months): 36
Minimum deposit: $500
Early withdrawal penalty: 1% of balance
Membership: Anyone can join Skyla by agreeing to a free membership in their partner association, the Carolinas Credit Union Foundation, and keeping at least $5 in a savings account.

Bread Savings – 4.95% APY

Term (months): 36
Minimum deposit: $1,500
Early withdrawal penalty: 6 months of interest
About: Bread Savings is the online consumer deposits bank operated by credit card issuer Comenity Capital Bank.

Merrick Bank – 4.95% APY

Term (months): 36
Minimum deposit: $25,000
Early withdrawal penalty: 6 months of interest
About: Primarily a credit card issuer and consumer finance provider, Merrick Bank offers online-only certificates of deposit.

Pros and Cons of a 3-Year CD

Pros

Pays a fixed, guaranteed return
Offers predictable earnings
May pay a higher rate than other options
Is safe and essentially risk-free
Can deter spending temptations

Cons

Imposes a penalty if you withdraw early
Only allows one deposit
If rates drop, you may wish you'd chosen a longer CD
If rates go up, you may wish you'd chosen a shorter CD

Pros Explained

Pays a fixed, guaranteed return: A CD's return is presented to you as the annual percentage yield (APY), and once you make your deposit, you'll be locking in that rate for the full duration of the CD. The bank cannot change the APY.
Offers predictable earnings: Because you'll know the fixed rate, you can calculate exactly how much your CD will be worth at maturity. Changes in financial markets or other news will not impact your earnings.
May pay a higher rate than other options: In some rate environments, you can earn a higher interest rate the longer you're willing to commit your funds, so stretching to three years may give you a rate premium over 2-year options. (It's not always true, though, so be sure to shop around.)
Is safe and essentially risk-free: If you open your CD at an FDIC-insured bank or NCUA-insured credit union, your CD deposits of up to $250,000 per person and per institution are protected, even if the institution fails.
Can deter spending temptations: Because you can't make withdrawals from a CD without paying a penalty, you may be dissuaded from spending your savings on unplanned purchases.

Cons Explained

Imposes a penalty if you withdraw early: If you need your funds before maturity, you can cash out, but you'll be charged an early withdrawal penalty. The amount of that penalty will be spelled out in your CD agreement, which you should review before committing your funds, as penalty policies can vary widely across institutions.
Only allows one deposit: Most CDs are designed to take one initial deposit that is kept on hold through the CD's term. Only niche "add-on" CDs offer the ability to deposit additional funds.
If rates drop, you may wish you'd chosen a longer CD: If rates go down after you lock-in your 3-year yield, you may wish you'd gone for a 4- or 5-year term instead, to extend your guaranteed rate further into the future.
If rates go up, you may wish you'd chosen a shorter CD: If you open a 3-year CD rate and then rates climb higher, you may wish you had opted for a shorter CD, enabling you to get out of your current rate sooner and open a new CD at a higher rate.

Alternatives to 3-Year CDs

Shorter-Term CDs

If you're not entirely confident you can leave the funds on deposit for a full three years, opening a certificate with a shorter term may be a better choice. Also, sometimes you can score a higher rate on a shorter CD than a longer one. It depends on the current rate environment, and also what promotional CDs might be available in the marketplace.

If you open a shorter-term CD, you can always cash it in when it matures and open a new CD. But you may find that rates have dropped. If rates are higher, that's great news. But if rates are lower than when you opened your initial CD, you may wish you'd locked in your rate for three years instead of opting for a shorter term.

High-Yield Savings and Money Market Accounts

Putting your money in a savings or money market account offers much more flexibility than a CD, with no risk of an early withdrawal penalty. You'll also be able to add and withdraw funds more or less as you like. The trade-off is that interest rates on liquid accounts can change at any time. So if rates are declining, the annual percentage yield on your high-yield savings or money market account will almost certainly go down, while any rate on a CD will hold.

In addition, liquid accounts don't always offer as high a return as CDs. By committing your funds to a CD term, you can usually boost your earnings, and sometimes quite substantially.

Bond Products

You can also opt to invest your funds in bonds or bond funds. Some, like U.S. Treasury savings bonds and Treasury notes, are very similar to CDs in that the rate is typically predictable if you hold the bond until maturity. They are also backed by the federal government, so like CDs, they are exceptionally safe.

U.S. Treasury I bonds, however, only have a fixed rate for six months at a time. Twice a year, the rate is adjusted based on the current inflation rate (hence the name I bonds). Like a CD, I bonds have an early withdrawal penalty, but it's a mild three months' worth of interest. But unlike a CD, you cannot cash in an I bond during its first 12 months for any reason.

Other bond options are municipal and corporate bonds of various lengths. But the easiest way for most people to buy these is through a bond mutual fund or bond ETF (exchange-traded fund) that bundles many bonds together. Some of these even include hundreds or thousands of bonds in a certain category, making them an index fund of bonds. By going this route, you can make investments and withdrawals at will, rather than having to be concerned with maturity dates.

The Stock Market

If you know you won't need your funds for three years, you could consider investing in stocks instead. The upside is that you could potentially earn quite a bit more in the stock market than with a fixed 3-year CD rate.

But beware the notable downside, which is that you can always lose money in the stock market, including scenarios where you lose most of your investment. Stocks are an excellent investment over long periods of time. But for a time horizon of just three years, there is no guarantee your investment will grow, or even retain its value.

Frequently Asked Questions

What Is a 3-year CD?

Certificates of deposit, or CDs, are savings products that pay the customer interest in exchange for agreeing to leave their deposit with the bank or credit union for a fixed period of time.
Most depository institutions offer a variety of CDs with different maturity dates; typically, the shortest ones will last three months while the longest ones range up to ten years, though five years is the longest term at most institutions. In theory, the longer the duration of the deposit, the higher the rate the institution is willing to offer.
CDs are considered safe, conservative investments because their rate of return is pre-determined and guaranteed to remain locked for the full term. In addition, virtually all CDs are offered by FDIC-insured banks, or by credit unions insured through the NCUA. As a result, deposits of up to $250,000 are protected, even if the financial institution faces liquidity problems.
Most CDs don't allow you to add funds after the initial deposit, making it a less favorable savings vehicle for those who wish to make periodic contributions. But CD accounts are well-suited for parking cash you won't need for a while and that you want invested reliably and essentially risk-free.
Usually, CDs are set to automatically renew at maturity. But you'll be notified of the maturity date in advance and given the opportunity to tell the bank you'd like to do something different with the money, such as withdraw it or transfer it to another institution. Fortunately, if you miss the maturity date by a few days, most banks and credit unions afford a grace period of a few days during which you can still withdraw your funds without penalty.
It's important to note that CD rates can vary significantly from one bank or credit union to another. Indeed, the top certificate rates nationwide are typically three and five times the industry average for a CD of the same duration. So it's critical you shop around.
When Is a 3-Year CD a Good Idea?

The main reason to consider a CD that's three years in length is because it fits your personal timeline. Maybe you know you can lock up the funds for that number of years because it's money for a student going to college further down the road than that, or its surplus savings you know you won't need to touch for a long time because you have other savings you can tap in the meantime.
Another reason to buy a 3-year CD is if you are building a 5-year CD ladder, which involves buying an array of different CD terms, in yearly durations of up to five years, so that you always have on CD maturing every year. To create a 5-year CD ladder, you'll need one 3-year CD for the group.
How Are CD Rates Determined?

The rate paid on CDs is determined by each bank and credit union and involves their particular need for deposits and the time horizon of their deposit strategy. However, the actions of the Federal Reserve loom large in the equation. The federal funds rate, which is determined by the central bank's Federal Open Market Committee, influences how much banks have to pay in order to borrow from each other. That, in turn, influences how much individual depository institutions are willing to pay consumers for their deposit funds.
When the Fed's rate is low, banks will offer lower yields on interest-bearing accounts. When interest rates go up, however, they tend to pay higher rates in order to attract customers.
What if I Need to Withdraw My Money Early?

To provide a disincentive to CD holders from taking their money out of the account before maturity, all banks and credit unions have an early withdrawal penalty policy. Withdrawing early will cause you to forfeit some of your interest earnings—three to 12 months' worth of interest is common—but the penalties vary widely by institution, with some harsh enough to eat into your original principal.
Some banks and credit unions offer penalty-free CDs, although they typically offer a lower rate and may be "all or nothing" propositions. If that's the case, you would need to pull out your entire balance and close the account if you want to withdraw early. Because of their lower rates, no penalty-free options make the cut in our ranking of the top-paying nationally available 3-years CDs.
How Can I Join a Credit Union on the List?

Unlike banks, credit unions are created to serve the needs of a specific community. In many cases, that means restricting membership to the residents of a certain area or to the employees of a particular company or group of companies.
However, some credit unions make it fairly easy for non-local individuals to join. For example, the institution may allow you to attain membership by making a donation to its foundation or a nonprofit in its community, or by joining a financial literacy or consumer protection organization like the American Consumer Council. The process of joining is also typically very easy, and it is often indistinguishable from the process of opening an account with a new bank.
Being open to credit union membership is a smart move for CD shoppers, as many of the best nationwide rates are offered by credit unions.

Rate Collection Methodology Disclosure

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs to customers nationwide, and determines daily rankings of the top-paying certificates in every major term. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the CD's minimum initial deposit must not exceed $25,000.

Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.

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