The best 3-year CD rates of October 2020

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The best 3-year CD rates of October 2020

Bank APY Minimum deposit Next steps
navy federal credit union 1.05% to 1.10% $1,000 Navy Federal Credit Union Navy Federal Credit Union Standard Certificate
first national bank logo 0.90% $1,000 First National Bank of America First National Bank of America Certificate of Deposit
comenity bank logo 0.85% $1,500 Comenity Direct Comenity Direct Certificate of Deposit 
first internet bank logo 0.81% $1,000 First Internet Bank of Indiana First Internet Bank of Indiana Certificate of Deposit 
ally bank logo 0.75% $0 Ally Ally Raise Your Rate CD
synchrony logo 0.75% $2,000 Synchrony Synchrony CD
0.75% $1,000 TAB Bank TAB Certificate of Deposit
tiaa bank logo 0.70% $1,000 TIAA Bank TIAA Basic Certificate of Deposit
nbkc bank logo 0.70% $1,000 NBKC Bank NBKC Certificate of Deposit 
discover bank logo 0.70% $2,500 Discover Discover CD
live oak bank 0.70% $2,500 Live Oak Bank Live Oak Bank Certificate of Deposit

*As of October 2020, the national average APY on a 3-year CD is 0.27%, according to the FDIC.

Table of Contents: Masthead Sticky

3-year CD rates at the largest US banks

The biggest banks in America pay lower rates than our top picks. However, it may be important to you to bank with a company you're familiar with. Here are the rates you'll earn on a 3-year CD with some of the most popular institutions:

Bank APY Next steps
Citibank 0.15% Citibank Citibank Fixed Rate Certificates of Deposit (CDs)
Capital One 0.30% Capital One Capital One 360 CDs®
PNC Bank 0.01% to 0.04% PNC Bank PNC Fixed Rate Certificate of Deposit
TD Bank 0.05% TD Bank TD Bank Choice Promotional Certificate of Deposit
Bank of America 0.03% Bank of America Bank of America Standard Term Certificate of Deposit
Chase Bank 0.01% to 0.05% Chase Chase Certificate of Deposit (CD)
US Bank 0.20% US Bank US Bank Certificate of Deposit
BB&T Bank 0.01% BB&T Bank BB&T Personal Certificate of Deposit

If you want to grow your money but keep it safe from the turbulence of the stock market, a certificate of deposit (CD) may be a good option

The best 3-year CD rates are at least 0.70% right now. You can snag a higher APY with longer CD terms, but 3-year CDs have their perks.

You'll likely earn a higher APY on a 3-year CD than with a shorter-term CD, and you won't have to part with your money for as long as you would with a longer term. Three-year terms provide a nice balance of a good rate and a relatively short length of time.

Learn more about our top picks

Navy Federal Credit Union Standard Certificate

Why it stands out: Navy Federal Credit Union pays higher rates for higher balances, but its APY is competitive even for smaller balances. Navy Federal compounds your interest daily like most banks would, unlike many credit unions that compound monthly.

3-year CD early withdrawal penalty: 180 days interest

What to look out for: Membership and tiered APY system. You or a family member must have ties to the military for you to become a member of Navy Federal. Also, keep in mind that you won't earn the highest APY unless your balance is at least $100,000.

First National Bank of America Certificate of Deposit

Why it stands out: First National Bank of America's main strength is its high APYs.

3-year CD early withdrawal penalty: 360 days interest

What to look out for: High early withdrawal penalty. Some of our other top picks charge less to take out funds before your CD matures.

Comenity Direct Certificate of Deposit

Why it stands out: Comenity Direct pays high rates on CDs and charges reasonable early withdrawal penalties.

3-year CD early withdrawal penalty: 180 days simple interest

What to look out for: Minimum deposit. Comenity Direct requires at least $1,500 to open a CD.

First Internet Bank of Indiana Certificate of Deposit

Why it stands out: First Internet Bank of Indiana pays a good rate for 3-year CDs, and contrary to what the bank's name may lead you to believe, this online bank is available to residents of all US states.

3-year CD early withdrawal penalty: 365 days interest

What to look out for: Monthly compounded interest and early withdrawal penalty. First Internet Bank of Indiana compounds your interest monthly, not daily. Depending on how much money is in your CD, this may or may not make a significant difference. You can also find a bank that charges less for an early withdrawal from a 3-year CD.

Ally High Yield CD

Why it stands out: Ally is one of the few banks that doesn't have a minimum deposit for opening a CD, so you can start with any amount. The bank's early withdrawal penalties are also lower than what most banks charge.

3-year CD early withdrawal penalty: 90 days interest

What to look out for: Types of CDs. If you know you want a 3-year CD from this bank, then the Ally High Yield CD is the one for you.

But if you're open to other term lengths, then you may want to look at the Raise Your Rate CD, which lets you increase your rate should Ally's rates go up. You'd be able to increase rates once during a 2-year term and twice during a 4-year term.

Ally also has an 11-month No Penalty CD.

Synchrony CD

Why it stands out: Synchrony pays competitive rates. If you're not positive you want a 3-year term, or if you're building a CD ladder, Synchrony has plenty of other term lengths to choose from.

3-year CD early withdrawal penalty: 180 days simple interest

What to look out for: Minimum deposit. You'll need at least $2,000 to open a CD.

TAB CD

Why it stands out: TAB Bank pays good rates and charges relatively low early withdrawal penalties. You get to choose how you receive your interest — keep it in your CD, receive a check, or transfer the money to another TAB bank account.

3-year CD early withdrawal penalty: 180 days interest

What to look out for: TAB CDs don't have any major red flags. The main downside is that you can find slightly better rates elsewhere right now.

TIAA Basic CD

Why it stands out: TIAA pays competitive rates on CDs, and its minimum deposit of $1,000 is pretty standard.

3-year CD early withdrawal penalty: 273 days interest

What to look out for: Early withdrawal penalty. Many of our other top picks charge less for withdrawing funds before your CD matures.

NBKC CD

Why it stands out: NBKC pays competitive rates. It also allows you to open a 1-year Add-to Starter CD along with your 3-year CD. You can open a Starter CD with just $25, but you must visit the Kansas City branch in person to open one.

3-year CD early withdrawal penalty: 360 days interest

What to look out for: Early withdrawal penalties and variable rates. For a 3-year term, a 360-day-interest early withdrawal penalty is a little steep. Unlike most banks, NBKC may change your rates after you've opened a CD. This could be good if rates go up, but bad if rates decrease.

Discover CD

Why it stands out: Discover pays good rates on CDs. It offers terms up to 10 years, which is great if you want to open other CDs along with your 3-year term to build a CD ladder.

3-year CD early withdrawal penalty: 6 months simple interest

What to look out for: Minimum deposit. Discover requires at least $2,500 to open a CD.

Live Oak Bank CD

Why it stands out: You'll earn a good rate, and Live Oak Bank charges low early withdrawal fees.

3-year CD early withdrawal penalty: 180 days simple interest

What to look out for: Minimum deposit. Live Oak Bank requires at least $2,500 to open a CD.

Other 3-year CDs we considered, but didn't make the cut

We looked at the following 3-year CDs as well, but they currently have lower rates than our winners:

  • Marcus High-Yield CD
  • Citizens Access Online CD
  • Pentagon Federal Credit Union Money Market Certificate
  • Sallie Mae CD
  • Popular Direct CD
  • BrioDirect High-Yield CD
  • American Express CD
  • CIT Bank CD
  • Amerant CD
  • Capital One 360 CD
  • BMO Harris CD

Frequently asked questions

Why trust our recommendations?

Personal Finance Insider's mission is to help smart people make the best decisions with their money. We understand that "best" is often subjective, so in addition to highlighting the clear benefits of a financial product or account — a high APY, for example — we outline the limitations, too. We spent hours comparing and contrasting the features and fine print of various products so you don't have to.

What is a CD?

 

A CD, or certificate of deposit, is a time-sensitive savings account that usually holds your money at a fixed interest rate for a specified period of time. If you don't need immediate access to your savings, a CD can guarantee a return on your money since you lock in a fixed APY for the term of the CD.

With most institutions, you typically won't be able to deposit more money or access your funds before the CD matures without paying a penalty.

You will, however, earn interest on the amount and have the option to collect those payments monthly or reinvest them into your CD. Most banks offer varying rates for different terms and deposit amounts — in many cases, the longer the term, the higher the rate.

At the CD's maturity date, you'll typically have a 10- to 14-day grace period in which you can withdraw your money and close the account or renew the term.

What is a 3-year CD?

With a 3-year CD, you stash away your money for 36 months and typically earn a fixed rate. You have the option to renew your CD at the end of the 3-year period, or close the account and pocket the money.

How do CD rates work?

Most CDs lock in your rate for the entire term. For example, if you open a 3-year CD at a 0.75% APY, you'll earn 0.75% for the entire three years. If you renew your CD after it matures, you'll earn the new rate available in three years.

There are exceptions to the fixed-rate rule. Some institutions offer variable-rate CDs or CDs that allow your rate to change after a predetermined amount of time.

Which is best: a 1-year, 3-year, or 5-year CD?

Terms of one, three, and five years are some of the most common CD options. Your choice will likely depend on how soon you plan to need the money and which term pays the highest rate. For the most part, longer terms pay higher rates — but that isn't always the case.

Going for a shorter term gives you the opportunity to snag a better APY if rates are up in a year. With a 3-year or 5-year CD, you could miss out on higher rates. But on the other hand, you could avoid lower rates with a 3-year or 5-year term if rates drop later.

 

Many experts recommend CD laddering. With this strategy, you open multiple CDs with different term lengths so you can take advantage of higher rates with longer terms, but also access some of your money earlier. For instance, you might open 1-year, 3-year, and 5-year CDs at the same time, which means you'll get some of your money back in one year, then more in three years, then more in five years.

Which is better, a 3-year CD or a high-yield savings account?

The choice between a 3-year CD and high-yield savings account will depend on several factors.

First, an institution typically pays a higher rate for a 3-year CD than for a savings account.

A CD also locks in your rate for the entire term. If rates are dropping, this could make the CD a better choice, because your savings account APY could decrease over the next few months. If rates are rising, the savings account might be a better fit, because your rate could go up. Either way, there's a good chance rates will fluctuate over a 3-year period.

 

It also depends on when you'll need to access your money. You should be able to access funds from your savings account regularly — but you'll have to pay a fee if you need access to money from your 3-year CD before it matures. You can also continuously add money to your savings account, whereas most CDs block you from making additional deposits after opening the account. 

Which is better, a 3-year CD or a money market account?

Like with a high-yield savings account, you may prefer a money market account over a CD if you want quick access to your money. Money market account rates also fluctuate, so you may prefer a money market account if rates are rising, but a CD if rates are dropping. Still, remember that rates will likely go up and down over a 3-year term.

 

Many banks require higher deposits for money market accounts than CDs, which could affect your decision. It's also good to remember that you can add more funds to your money market account over time, while a CD only allows an opening deposit.

Which is better, a 5-year CD or another investment account?

CDs aren't generally considered investments the same way something like an index fund, which puts your money into the stock market, is. Instead, a CD is typically viewed as a type of savings account, and your potential for losses and gains — your risk — is much more limited. Because the stock market is risky, experts generally don't advise investing money you'll need in the next five years. In the case of a stock market drop, you wouldn't have time to make up your losses.

If you need to access your money in three years and want a guaranteed rate of return, a 3-year CD is a better choice than a different type of investment account. 

If you're comfortable parting with your money for longer and want to take more risk with your money, then you may want to invest in the stock market. One way to do this is through tax-advantaged retirement accounts, like a 401(k) or IRA, which grows your money over decades. Another is through brokerage accounts, which are useful tools to build long-term wealth, but can't guarantee a given return like a CD can.

There is such a thing as an IRA CD, which is a sort of combo savings/investment account. It's a safe investment tool that may be a worthwhile option for people who are close to retirement age.

Related Content Module: More Savings Coverage

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Business Insider

BankAPYMinimum depositNext steps
5f6b7086c4049200115cb20d?width=600&format=jpeg&auto=webp
Navy Federal Credit Union
1.05% to 1.10%$1,000Learn more
5f0892a4f34d052d64677e1e?width=600&format=jpeg&auto=webp
First National Bank of America
0.90%$1,000Learn more
5f0892c24dca68169770731e?width=600&format=jpeg&auto=webp
Comenity Direct
0.85%$1,500Learn more 
5f0893134dca68173a2ddc98?width=600&format=jpeg&auto=webp
First Internet Bank
0.81%$1,000Learn more 
5f35421be89ebf001f044421?width=600&format=jpeg&auto=webp
Ally
0.75%$0Learn more
5f0dd90f3ad861725a50ce38?width=600&format=jpeg&auto=webp
Synchrony Bank
0.75%$2,000Learn more
5f3e9f1ecdf25a001e84e749?width=600&format=jpeg&auto=webp
TAB Bank
0.75%$1,000Learn more
5f0892895af6cc7e8f750cab?width=600&format=jpeg&auto=webp
TIAA Bank
0.70%$1,000Learn more
5f0893664dca68178d57c8b5?width=600&format=jpeg&auto=webp
NBKC Bank
0.70%$1,000Learn more 
5ed966d1aee6a80d9c06a938?width=600&format=jpeg&auto=webp
Discover Bank
0.70%$2,500Learn more
5f63ddad57b7da001ee12601?width=600&format=jpeg&auto=webp
Live Oak Bank
0.70%$2,500Learn more

*As of October 2020, the national average APY on a 3-year CD is 0.27%, according to the FDIC.

The biggest banks in America pay lower rates than our top picks. However, it may be important to you to bank with a company you're familiar with. Here are the rates you'll earn on a 3-year CD with some of the most popular institutions:

If you want to grow your money but keep it safe from the turbulence of the stock market, a certificate of deposit (CD) may be a good option

The best 3-year CD rates are at least 0.70% right now. You can snag a higher APY with longer CD terms, but 3-year CDs have their perks.

You'll likely earn a higher APY on a 3-year CD than with a shorter-term CD, and you won't have to part with your money for as long as you would with a longer term. Three-year terms provide a nice balance of a good rate and a relatively short length of time.

APY
0.50% to 1.25% APY

Min Deposit
$1,000

Featured Reward
None

Editor's Rating
  • Details
  • Pros & Cons
    • Terms ranging from 3 months to 7 years
    • Earn higher APY with a higher balance
    • Early withdrawal penalty of 90 days dividends for terms of 3 months to 1 year; 180 days dividends for terms of 1 year to 5 years; 365 days interest for terms of 6 and 7 years
    • You must have a tie to the military to become a Navy Federal Credit Union member
    Pros
    • Competitive APY, even for lower balances
    • Terms up to 7 years
    Cons
    • $1,000 opening deposit
    • Minimum $100k to earn highest APY with some terms
    • Standard-to-high early withdrawal penalties
    • Membership is only available to people affiliated with the military

    Why it stands out: Navy Federal Credit Union pays higher rates for higher balances, but its APY is competitive even for smaller balances. Navy Federal compounds your interest daily like most banks would, unlike many credit unions that compound monthly.

    3-year CD early withdrawal penalty: 180 days interest

    What to look out for: Membership and tiered APY system. You or a family member must have ties to the military for you to become a member of Navy Federal. Also, keep in mind that you won't earn the highest APY unless your balance is at least $100,000.

    APY
    0.80% to 1.10% APY

    Min Deposit
    $1,000

    Featured Reward
    None

    Editor's Rating
  • Details
  • Pros & Cons
    • Term lengths ranging from 12 to 84 months
    • 180 days interest for terms of 12-23 months, 360 days interest for terms of 24-47 months, 540 days interest for terms of 48 to 84 months
    • FDIC insured
    Pros
    • Competitive APY
    • Term lengths up to 84 months
    Cons
    • $1,000 opening deposit
    • High early withdrawal penalties
    • No term lengths under 12 months

    Why it stands out: First National Bank of America's main strength is its high APYs.

    3-year CD early withdrawal penalty: 360 days interest

    What to look out for: High early withdrawal penalty. Some of our other top picks charge less to take out funds before your CD matures.

    APY
    0.60% to 0.90% APY

    Min Deposit
    $1,500

    Featured Reward
    None

    Editor's Rating
  • Details
  • Pros & Cons
    • Terms ranging from 1 year to 5 years
    • Early withdrawal penalty of 180 days simple interest for terms of 1-3 years; 365 days simple interest for terms of 4-5 years
    • Interest compounded daily, paid monthly
    • FDIC insured
    Pros
    • Competitive APY
    • Standard early withdrawal penalties
    Cons
    • $1,500 opening deposit
    • No terms under 1 year or over 5 years
    Read Our Review Read Our ReviewA looong arrow, pointing right

    Why it stands out: Comenity Direct pays high rates on CDs and charges reasonable early withdrawal penalties.

    3-year CD early withdrawal penalty: 180 days simple interest

    What to look out for: Minimum deposit. Comenity Direct requires at least $1,500 to open a CD.

    APY
    0.25% to 0.96% APY

    Min Deposit
    $1,000

    Featured Reward
    None

    Editor's Rating
  • Details
  • Pros & Cons
    • Terms ranging from 3 months to 5 years
    • 90 days interest early withdrawal penalty for 3-month term; 180 days interest for 6-18 month term; 365 days interest for 24-60 month term
    • Interest is compounded monthly and paid monthly
    Pros
    • Competitive APY
    • Standard early withdrawal penalties
    Cons
    • $1,000 opening deposit
    • No terms over 5 years
    • Interest is compounded monthly, not daily

    Why it stands out: First Internet Bank of Indiana pays a good rate for 3-year CDs, and contrary to what the bank's name may lead you to believe, this online bank is available to residents of all US states.

    3-year CD early withdrawal penalty: 365 days interest

    What to look out for: Monthly compounded interest and early withdrawal penalty. First Internet Bank of Indiana compounds your interest monthly, not daily. Depending on how much money is in your CD, this may or may not make a significant difference. You can also find a bank that charges less for an early withdrawal from a 3-year CD.

    APY
    0.20% to 1.00% APY

    Min Deposit
    None

    Featured Reward
    None

    Editor's Rating
  • Details
  • Pros & Cons
    • Terms ranging from 3 months to 5 years
    • Early withdrawal penalty of 60 days interest penalty term of 24 months or less; 90 days interest for term of 25 to 36 months; 120 days interest for terms of 37 to 48 months; 150 days interest for terms of 49 months or more
    • Interest compounded daily, paid monthly
    • FDIC insured
    Pros
    • Competitive APY
    • No required opening deposit
    • Low early withdrawal penalties
    Cons
    • No terms over 5 years
    • No physical branch locations
    Read Our Review Read Our ReviewA looong arrow, pointing right

    Why it stands out: Ally is one of the few banks that doesn't have a minimum deposit for opening a CD, so you can start with any amount. The bank's early withdrawal penalties are also lower than what most banks charge.

    3-year CD early withdrawal penalty: 90 days interest

    What to look out for: Types of CDs. If you know you want a 3-year CD from this bank, then the Ally High Yield CD is the one for you.

    But if you're open to other term lengths, then you may want to look at the Raise Your Rate CD, which lets you increase your rate should Ally's rates go up. You'd be able to increase rates once during a 2-year term and twice during a 4-year term.

    Ally also has an 11-month No Penalty CD.

    APY
    0.25% APY to 0.90% APY

    Min Deposit
    $2,000 minimum deposit

    Featured Reward
    None

    Editor's Rating
  • Details
  • Pros & Cons
    • Terms ranging from 3 months to 5 years
    • Early withdrawal penalty of 90 days simple interest for terms of 12 months or less; 180 days simple interest for terms over 12 months but under 48 months; 365 days interest for terms of 48+ months
    • Interest compounded daily, paid monthly
    • FDIC insured
    Pros
    • Competitive APY
    • Variety of term lengths
    Cons
    • $2,000 initial deposit
    • No terms over 5 years
    • Standard-to-high early withdrawal penalties
    Read Our Review Read Our ReviewA looong arrow, pointing right

    Why it stands out: Synchrony pays competitive rates. If you're not positive you want a 3-year term, or if you're building a CD ladder, Synchrony has plenty of other term lengths to choose from.

    3-year CD early withdrawal penalty: 180 days simple interest

    What to look out for: Minimum deposit. You'll need at least $2,000 to open a CD.

    APY
    0.50% to 0.85% APY

    Min Deposit
    $1,000

    Featured Reward
    None

    Editor's Rating
  • Details
  • Pros & Cons
    • Terms from 6 months to 5 years
    • Early withdrawal penalties are as follows: 90 days interest for terms of 12 months or less, 180 days interest for terms over 12 months
    • Interest compounds daily to maximize earnings
    • FDIC insured
    Pros
    • Competitive APY
    • Low-to-standard early withdrawal penalties
    • Choose to keep accumulated interest in CD, receive a check, or transfer to another TAB account
    Cons
    • No terms under 6 months or over 5 years
    • $1,000 minimum deposit

    Why it stands out: TAB Bank pays good rates and charges relatively low early withdrawal penalties. You get to choose how you receive your interest — keep it in your CD, receive a check, or transfer the money to another TAB bank account.

    3-year CD early withdrawal penalty: 180 days interest

    What to look out for: TAB CDs don't have any major red flags. The main downside is that you can find slightly better rates elsewhere right now.

    APY
    0.25% to 0.90% APY

    Min Deposit
    $1,000

    Featured Reward
    None

    Editor's Rating
  • Details
  • Pros & Cons
    • Bank online or in person if you live in certain parts of Florida
    • Term lengths ranging from 3 months to 5 years
    • Early withdrawal penalties ranging from 22 days to 456 days simple interest
    • Interest compounded daily, paid monthly
    • FDIC insured
    Pros
    • Competitive APY
    • Interest compounds daily
    Cons
    • $1,000 minimum deposit
    • No term over 5 years
    • Standard-to-high early withdrawal penalties

    Why it stands out: TIAA pays competitive rates on CDs, and its minimum deposit of $1,000 is pretty standard.

    3-year CD early withdrawal penalty: 273 days interest

    What to look out for: Early withdrawal penalty. Many of our other top picks charge less for withdrawing funds before your CD matures.

    APY
    0.35% to 0.75% APY

    Min Deposit
    $1,000

    Featured Reward
    None

    Editor's Rating
  • Details
  • Pros & Cons
    • Online bank with branches in Kansas City, MO
    • Term lengths ranging from 3 months to 5 years
    • Early withdrawal penalties are as follows: 90 days interest for terms of 3-6 months; 180 days interest for 12-month terms; 360 days interest for terms of 24-36 months; 540 days interest for terms of 48-60 months
    • Open a 1-year Add-to Starter CD on top of another CD term for no opening deposit, and add more money for the first year
    • Interest compounded daily, paid monthly
    • FDIC insured
    Pros
    • Competitive APY
    • Option for a 1-year Add-to Starter CD, with no opening deposit
    Cons
    • $1,000 opening deposit for most CDs
    • Rates can change after you open the account
    • High early withdrawal penalties
    • Only branches are in Kansas City, MO
    • Limited customer support hours

    Why it stands out: NBKC pays competitive rates. It also allows you to open a 1-year Add-to Starter CD along with your 3-year CD. You can open a Starter CD with just $25, but you must visit the Kansas City branch in person to open one.

    3-year CD early withdrawal penalty: 360 days interest

    What to look out for: Early withdrawal penalties and variable rates. For a 3-year term, a 360-day-interest early withdrawal penalty is a little steep. Unlike most banks, NBKC may change your rates after you've opened a CD. This could be good if rates go up, but bad if rates decrease.

    APY
    0.25% to 0.80% APY

    Min Deposit
    $2,500

    Featured Reward
    None

    Editor's Rating
  • Details
  • Pros & Cons
    • Terms ranging from 3 months to 10 years
    • Early withdrawal penalties ranging from 3 months to 24 months interest
    • 100% US-based customer service available 24/7
    • No hidden fees
    • Interest compounded daily, paid monthly
    • FDIC insured
    Pros
    • Terms up to 10 years
    • Competitive APY
    Cons
    • $2,500 opening deposit
    • High early withdrawal penalties for longer terms
    • Doesn't offer no-penalty CDs
    • Only 1 branch location
    Read Our Review Read Our ReviewA looong arrow, pointing right

    Why it stands out: Discover pays good rates on CDs. It offers terms up to 10 years, which is great if you want to open other CDs along with your 3-year term to build a CD ladder.

    3-year CD early withdrawal penalty: 6 months simple interest

    What to look out for: Minimum deposit. Discover requires at least $2,500 to open a CD.

    APY
    0.60% to 0.80% APY

    Min Deposit
    $2,500

    Featured Reward
    None

    Editor's Rating
  • Details
  • Pros & Cons
    • Terms ranging from 6 months to 5 years
    • Early withdrawal penalties: 90 days simple interest for terms under 24 months, 180 days simple interest for terms of 24 months or more
    • Interest compounded daily, paid monthly
    • FDIC insured
    Pros
    • Competitive APY
    • Low-to-standard early withdrawal penalties
    Cons
    • No terms under 6 months or over 5 years
    • $2,500 minimum deposit

    Why it stands out: You'll earn a good rate, and Live Oak Bank charges low early withdrawal fees.

    3-year CD early withdrawal penalty: 180 days simple interest

    What to look out for: Minimum deposit. Live Oak Bank requires at least $2,500 to open a CD.

    We looked at the following 3-year CDs as well, but they currently have lower rates than our winners:

    Why trust our recommendations?

    Personal Finance Insider's mission is to help smart people make the best decisions with their money. We understand that "best" is often subjective, so in addition to highlighting the clear benefits of a financial product or account — a high APY, for example — we outline the limitations, too. We spent hours comparing and contrasting the features and fine print of various products so you don't have to.

    What is a CD?

    The best CD rates of October 2020

    A CD, or certificate of deposit, is a time-sensitive savings account that usually holds your money at a fixed interest rate for a specified period of time. If you don't need immediate access to your savings, a CD can guarantee a return on your money since you lock in a fixed APY for the term of the CD.

    With most institutions, you typically won't be able to deposit more money or access your funds before the CD matures without paying a penalty.

    You will, however, earn interest on the amount and have the option to collect those payments monthly or reinvest them into your CD. Most banks offer varying rates for different terms and deposit amounts — in many cases, the longer the term, the higher the rate.

    At the CD's maturity date, you'll typically have a 10- to 14-day grace period in which you can withdraw your money and close the account or renew the term.

    What is a 3-year CD?

    With a 3-year CD, you stash away your money for 36 months and typically earn a fixed rate. You have the option to renew your CD at the end of the 3-year period, or close the account and pocket the money.

    How do CD rates work?

    Most CDs lock in your rate for the entire term. For example, if you open a 3-year CD at a 0.75% APY, you'll earn 0.75% for the entire three years. If you renew your CD after it matures, you'll earn the new rate available in three years.

    There are exceptions to the fixed-rate rule. Some institutions offer variable-rate CDs or CDs that allow your rate to change after a predetermined amount of time.

    Which is best: a 1-year, 3-year, or 5-year CD?

    Terms of one, three, and five years are some of the most common CD options. Your choice will likely depend on how soon you plan to need the money and which term pays the highest rate. For the most part, longer terms pay higher rates — but that isn't always the case.

    Going for a shorter term gives you the opportunity to snag a better APY if rates are up in a year. With a 3-year or 5-year CD, you could miss out on higher rates. But on the other hand, you could avoid lower rates with a 3-year or 5-year term if rates drop later.

    A CD ladder can help you grow your money without the risks of the stock market

    Many experts recommend CD laddering. With this strategy, you open multiple CDs with different term lengths so you can take advantage of higher rates with longer terms, but also access some of your money earlier. For instance, you might open 1-year, 3-year, and 5-year CDs at the same time, which means you'll get some of your money back in one year, then more in three years, then more in five years.

    Which is better, a 3-year CD or a high-yield savings account?

    The choice between a 3-year CD and high-yield savings account will depend on several factors.

    First, an institution typically pays a higher rate for a 3-year CD than for a savings account.

    A CD also locks in your rate for the entire term. If rates are dropping, this could make the CD a better choice, because your savings account APY could decrease over the next few months. If rates are rising, the savings account might be a better fit, because your rate could go up. Either way, there's a good chance rates will fluctuate over a 3-year period.

    The best online high-yield savings accounts of October 2020

    It also depends on when you'll need to access your money. You should be able to access funds from your savings account regularly — but you'll have to pay a fee if you need access to money from your 3-year CD before it matures. You can also continuously add money to your savings account, whereas most CDs block you from making additional deposits after opening the account. 

    Which is better, a 3-year CD or a money market account?

    Like with a high-yield savings account, you may prefer a money market account over a CD if you want quick access to your money. Money market account rates also fluctuate, so you may prefer a money market account if rates are rising, but a CD if rates are dropping. Still, remember that rates will likely go up and down over a 3-year term.

    Here are the best money market accounts for October 2020

    Many banks require higher deposits for money market accounts than CDs, which could affect your decision. It's also good to remember that you can add more funds to your money market account over time, while a CD only allows an opening deposit.

    Which is better, a 5-year CD or another investment account?

    CDs aren't generally considered investments the same way something like an index fund, which puts your money into the stock market, is. Instead, a CD is typically viewed as a type of savings account, and your potential for losses and gains — your risk — is much more limited. Because the stock market is risky, experts generally don't advise investing money you'll need in the next five years. In the case of a stock market drop, you wouldn't have time to make up your losses.

    If you need to access your money in three years and want a guaranteed rate of return, a 3-year CD is a better choice than a different type of investment account. 

    If you're comfortable parting with your money for longer and want to take more risk with your money, then you may want to invest in the stock market. One way to do this is through tax-advantaged retirement accounts, like a 401(k) or IRA, which grows your money over decades. Another is through brokerage accounts, which are useful tools to build long-term wealth, but can't guarantee a given return like a CD can.

    There is such a thing as an IRA CD, which is a sort of combo savings/investment account. It's a safe investment tool that may be a worthwhile option for people who are close to retirement age.

    • The best 3-year CD rates of October 2020 photo


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