The best 3-year CD rates of October 2020

By Laura Grace Tarpley

*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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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?

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 3-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.

This post was reviewed and updated on October 19, 2020.