Today’s best 3-year CD rates are surpassing 4.00% APY, making it an opportune time to invest in a high-yield CD. CDs are available in various terms ranging from three to 60 months, and banks and credit unions typically offer higher rates for longer-term CDs. However, in 2023, some shorter- to mid-term CDs are offering better APYs than 4-year and 5-year terms. With the top 3-year CD rates exceeding 4.00% APY, now is a great time to consider investing in a high-yield CD.
Pros of the Best 3-year CDs:
– No minimum deposit requirements, allowing anyone to save.
– Option to receive monthly interest payouts.
Cons of the Best 3-year CDs:
– You may find slightly higher rates elsewhere.
– Early withdrawal fee of 180 days.
Pros of another CD option:
– Easy to find transparent product information on the website.
– Quick and easy account opening process.
Cons of another CD option:
– Minimum deposit is higher than some online banks.
– Early withdrawal penalty is 360 days of interest, which is on the high side.
Pros of one more CD option:
– You receive a bonus rate when renewing a 1, 2, or 3-year CD.
– Option to choose monthly interest payouts.
Cons of this CD option:
– Minimum deposit is higher than some online banks.
– Early withdrawal penalty is 180 days of interest.
Pros of a different CD option:
– Highly rated mobile app.
– Availability of bump-up, no-penalty, and IRA CDs.
Cons of this CD option:
– Minimum deposit is higher than some online banks.
– Early withdrawal penalty is 180 days of interest.
Pros of another CD option:
– No minimum deposit requirements, allowing anyone to save.
– Option to choose monthly interest payouts.
Cons of this CD option:
– It may be difficult to find product details on the website.
– Early withdrawal penalty is 180 days of interest.
Pros of a different CD option:
– Easy to find transparent product information on the website.
– User-friendly mobile app.
– Early withdrawal penalty is 90 days of interest, which is lower than most banks.
Cons of this CD option:
– None mentioned.
Pros of a different CD option:
– Any individual can become a member, unlike many credit unions.
– CDs are available in standard, jumbo, and IRA versions.
Cons of this CD option:
– Minimum deposit is higher than some online banks.
– Early withdrawal penalty is 180 days of interest.
Pros of another CD option:
– Daily compounding of interest.
– Availability of 24/7 customer service by phone.
Cons of this CD option:
– Minimum deposit is higher than most online banks.
– Early withdrawal penalty is 365 days of interest, the highest observed.
Pros of one final CD option:
– Option to choose monthly interest payouts.
– Availability of 24/7 customer service by phone.
Cons of this CD option:
– Early withdrawal penalty is 180 days of interest.
– BMO Harris branches cannot be used by BMO Alto customers.
A 3-year CD is a certificate of deposit that offers a fixed interest rate for 36 months. During this period, no additional money can be added or removed, and an early withdrawal penalty is incurred if cash is withdrawn before the CD matures. The penalty typically amounts to about three to 12 months of interest, depending on the CD term. Banks and credit unions often offer higher APYs for CDs compared to savings or money market accounts as a reward for keeping funds locked up.
A 3-year CD works similarly to CDs of other lengths. When the CD reaches maturity, there are two options: closing the CD and withdrawing the cash (including the deposit and interest) or renewing it at the current interest rate. A grace period of seven to 10 days is usually provided after the CD matures to make this decision. If no action is taken by the end of the grace period, the CD is automatically renewed for another term of the same length at the prevailing interest rate. This means that the rate could be higher or lower than the original CD’s APY. Monthly interest payouts may be chosen, but this may reduce the APY by forgoing compounding.
A 3-year CD is suitable for individuals who have surplus cash that won’t be needed for several years and desire a decent return from a low-risk investment. Deposits held at FDIC-member banks and NCUA-member credit unions are insured up to $250,000 per account ownership type. Currently, the highest 3-year CD rates exceed 4.00% APY, allowing for the preservation of funds while facilitating growth. However, it’s important to consider the extended term and evaluate options for shorter-term CDs, no-penalty CDs, or high-yield savings accounts if quicker access to funds is anticipated.
Choosing a CD length depends on the intended duration of locking up funds and predictions regarding CD rates. Opting for a 4-year or 5-year CD may be suitable for those wanting to secure today’s rates without needing immediate access to cash. Although it doesn’t offer the same potential for earnings as the stock market, a CD eliminates risk, leading to a risk/reward trade-off. Alternatively, a shorter-term CD is a wise choice for individuals who require access to their money sooner, want to prevent impulsive spending, or wish to benefit from the best 1-year CD rates.
A CD ladder helps mitigate the key disadvantages of CDs: funds being tied up and the possibility of missing out on rising interest rates. By creating a CD ladder, the deposit is divided into multiple CDs with varying maturities. A conventional CD ladder includes five CDs with terms of one, two, three, four, and five years. Each time a CD matures, it can be cashed out or renewed, perpetuating the ladder. This strategy enhances liquidity compared to depositing all funds in a single long-term CD and enables the maximization of changing interest rates. When rates increase, shorter-term CDs can be renewed at higher rates, potentially found by switching banks. In the event of declining rates, existing longer-term CDs continue to offer higher APYs.
CDs offer several advantages, such as a guaranteed rate of return, potentially higher APYs compared to savings accounts, and minimal risk. CD laddering can add stability to an investment portfolio over the long term and provide a steady income stream during retirement. However, CDs also have drawbacks, including early withdrawal penalties and lower returns compared to stocks, ETFs, and various other investments. Ultimately, CDs can be worthwhile when seeking the security they provide, as deposits in federally-assured institutions are protected, and a guaranteed rate of return is ensured. CDs are also suitable for short-term saving objectives, allowing funds to grow while remaining inaccessible. Nevertheless, if more cash access is needed or higher potential returns outweigh additional risk, other investment options like stocks, ETFs, or index funds may be more beneficial.
In summary, the highest 3-year CD rates currently surpass those offered by most high-yield savings accounts, making them an excellent choice for savers seeking favorable rates. However, it is important to remember that CDs alone may not generate the required returns for wealth building and should only constitute a portion of an investment portfolio. Consulting with a financial advisor can help optimize investment strategies.