Best National 3-year CD rates pay up to 1.70%

Clear piggy bank with coins

Along with 4- and 5-year yields, national 3-year CD returns are getting the short end of the stick since the Federal Reserve raised rates in December.

Like their longer-term counterparts, the top nationally available 3-year yield has dropped repeatedly since the Fed's move, which of course is the opposite outcome we had hoped savers would reap.

In fact, although the top national 5-year rate has taken a bigger APY hit, the relative magnitude of the 3-year retreat is the worst of any term, with today's top rate paying 8% less than in mid-December.

As usual, this means that local deals from credit unions and community banks are still the best way to earn top dollar on your CD investments, up to 2.33% APY right now on 3-year certificates.

As for ripple effects from the Fed, we've given up on any from the first hike. But what about the next increase, and when will that come? We'll spell out what's known and unknown.

The top national deals

For almost six months, beginning last July, E-Loan towered above the competition for nationally available 3-year returns.

Not only did its 1.85% APY outpay the runner-up by almost two tenths of a percentage point, but it was the best national yield we'd seen in almost four years.

All that ended in mid-January, though, when E-Loan lowered its 36-month yield to 1.75% APY.

Not a month later, it dropped its rate again, to 1.70% APY.

That's where we stand today: a top nationally available rate that's sunk from 1.85% to 1.70% APY over the course of two months when we thought rates would more likely go up.

It leaves us with little consolation other than that we're still reasonably above the post-recession low for top national 3-year certificates, which was 1.40% APY three years ago.

TOP 36-MONTH CD RATES: Nationally Available Bank Deals

Bank APY Minimum Deposit
State Farm Bank 1.70% $500
E-Loan 1.70% $10,000
State Bank of India Indian – New York 1.66% $5,000
Silvergate Bank 1.66% $25,000
First Internet Bank of Indiana 1.61% $1,000
Nationwide Bank 1.60% $500
Radius Bank 1.60% $500
Santander Bank 1.60% $500
Sallie Mae Bank 1.60% $2,500
Colorado Federal Savings Bank 1.60% $5,000
Live Oak Bank 1.55% $2,500
California First National Bank 1.55% $5,000
Ally Bank 1.55% $25,000
State Bank of India – Chicago 1.51% $2,500
AloStar Bank of Commerce 1.50% $1,000
CIT Bank 1.50% $1,000
Synchrony Bank 1.50% $2,000
Discover Bank 1.50% $2,500
TAB Bank 1.46% $1,000
EverBank 1.46% $1,500
Giant Bank 1.46% $2,500
Barclays Bank 1.45% No minimum
Nordstrom Bank 1.45% $1,000
BAC Florida Bank 1.45% $1,500
BankDirect 1.45% $10,000

Earning more with local deals

Fortunately, many savers can do better by investing through a credit union or community bank, the best of which are paying above 2% on certificates of deposit in the 3-year range.

TOP 3-YEAR CD RATES: Credit Union, Community Bank Deals

Bank States Term (in months) APY
Self Reliance New York Federal Credit Union New York 36 2.33%
Cedar Falls Community Credit Union Iowa 37 2.30%
San Patricio County Teachers Federal Credit Union Texas 36 2.25%
University of Iowa Community Credit Union Iowa, Illinois 37 2.25%
Veridian Credit Union Iowa, Nebraska 39 2.25%
Farmers State Bank Iowa 39 2.25%
Members Choice of Central Texas Credit Union Texas 36 2.02%
Linn Area Credit Union Iowa 33 2.00%
Vibrant Credit Union Illinois, Iowa 33 2.00%
1st United Services Credit Union California 36 2.00%
Crescent Bank Louisiana 36 2.00%
First Ipswich Bank Massachusetts 36 2.00%
Institution for Savings Massachusetts 30 2.00%
Potlatch No. 1 Federal Credit Union Idaho, Washington 36 2.00%
The Pioneer Savings Bank Ohio 36 2.00%
Vital Federal Credit Union South Carolina 36 2.00%
Gulf Coast Federal Credit Union Texas 36 1.95%
First Federal Credit Union Iowa 33 1.90%
Security First Credit Union Texas 37 1.90%
F&A Federal Credit Union California 36 1.87%
Union Bank & Trust Nebraska, Kansas 30 1.85%
NavyArmy Community Credit Union Texas 36 1.85%
Boeing Helicopters Credit Union Pennsylvania 38 1.85%
Georgetown Bank Massachusetts 30 1.80%
Collins Community Credit Union Iowa 30 1.76%
North Platte Union Pacific Employees Credit Union Nebraska 36 1.76%
Community Financial Services Bank Kentucky, Tennessee, Missouri, Indiana or Illinois 33 1.75%

Awaiting more help from the Fed

Whether you qualify for a local deal or opt for a top-paying national bank, you'll definitely want to take advantage of these offers because they pay three to five times more than the current average return of 0.54% APY, according to our weekly nationwide survey of banks and thrifts.

The average return fell as low as 0.43% two summers ago before beginning a slow but steady rebound.

Unfortunately, we're still a long way from February 2007 — before reckless mortgage lending plunged us into the Great Recession — when the average return on 36-month CDs was 3.8% APY.

The Federal Reserve's subsequent efforts to rescue the economy by pushing interest rates to record lows had condemned savers to pitiful returns for almost seven years.

Then in December, the Fed finally began what was expected to be a gradual process of returning interest rates to "normal" levels over the next few years.

The initial step was a small one, an increase of just a quarter of a point in what's called the federal funds rate.

That's what commercial banks pay to borrow money from each other through the Fed, and it's the financial lever the nation's bank for banks uses to control interest rates throughout the economy.

The Fed's committee had previously indicated that four quarter-point increases over the course of 2016 seemed likely.

But since then, global security concerns, rock-bottom oil prices and uncertain inflation trends have some Wall Street analysts betting the Fed will pause its previously anticipated path.

The Fed's rate-setting committee meets next week, announcing its decision on rates March 16.

No one knows whether we'll see another small bump after that meeting or will be left watching and waiting until its June meeting — or later.

But in any case, it's clear that a second (or even third) Fed increase will be needed to move banks off the dime in normalizing their own rate sheets.