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

Clear piggy bank with coins 3-year cd rates

Along with 5-year yields, 3-year CD rates 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 36-month certificates.

Obviously, a single bump from the Fed was insufficient to move banks' rate sheets upward. But what about a second increase, and when might that come? We'll spell out what we know.

The top national deals

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

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.

Indeed, the lead for 3-year returns had sunk as far as 1.40% APY after the recession, reaching its low point in 2013.

Top 3-year CD rates chart

But after E-Loan lowered its 36-month yield from 1.85% to 1.75% APY in January, it and a handful of other contenders have bobbed the national lead up and down between 1.75% and a disappointing 1.66% APY.

The top rate today is 1.70% APY, held there since late July by relative newcomer Bank of Baroda.

As India's second-largest bank, Bank of Baroda operates in 25 countries. Its CDs for American consumers are offered by the bank's FDIC-insured U.S. branch, which has operated in New York for more than 30 years.

However, the bank only recently began accepting nationwide CD deposits via a mail-in process.

TOP 6-MONTH CD RATES: Nationally Available Bank Deals

Bank APY Minimum Deposit
Bank of Baroda 1.70% $1,000
State Bank of India-Chicago 1.68% $2,500
State Bank of India-New York 1.68% $5,000
TAB Bank 1.62% $1,000
EverBank 1.61% $1,500
Radius Bank 1.60% $500
Sallie Mae Bank 1.60% $2,500
E-Loan 1.60% $10,000
The Federal Savings Bank 1.60% $10,000
Popular Direct 1.60% $10,000
VirtualBank 1.56% $10,000
Live Oak Bank 1.55% $2,500
Ally Bank 1.55% $25,000
Barclays Bank 1.50% No minimum
Synchrony Bank 1.50% $2,000
Discover Bank 1.50% $2,500

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.

By stretching or shrinking your term by a few months, you can boost your list of options, resulting in the more than a dozen deals below. You'll even find a few that are available nationwide or throughout a multistate region.

TOP REGIONAL 6-MONTH CDS: Credit Unions & Community Banks

Bank States Term (in months) APY
Self Reliance New York Federal Credit Union New York 36 2.33%
Community Financial Services Bank Illinois, Missouri, Tennessee, Kentucky, Indiana 33 2.02%
VITAL Federal Credit Union South Carolina 36 2.01%
Ardent Credit Union Pennsylvania 30 2.00%
Vibrant Credit Union Illinois, Iowa 33 2.00%
Linn Area Credit Union Iowa 33 2.00%
Gulf Coast Federal Credit Union Texas 36 1.95%
NavyArmy Community Credit Union Texas 36 1.85%
RTN Federal Credit Union Nationwide* 37 1.85%
Crescent Bank Louisiana 36 1.81%
Georgetown Bank Massachusetts 36 1.80%
Northern Skies Federal Credit Union Alaska 36 1.76%
USAlliance Federal Credit Union Nationwide* 36 1.76%
Greater Alliance Federal Credit Union New Jersey 36 1.75%
Potlatch No. 1 Federal Credit Union Idaho, Washington 36 1.75%
Home Loan Investment Bank Rhode Island, Connecticut, Massachusetts 36 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 0.57% APY, according to our weekly nationwide survey of banks and thrifts.

The average return fell as low as 0.43% in the summer of 2013, 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.

But since then, global instabilities and an inflation rate that's still lower than the healthy target rate have given the Fed pause, with no further rate increases announced at its meetings since December.

The rate-setting committee meets again next week, announcing its decision on rates Nov. 2. However, most economists and Wall Street forecasters predict we'll be left waiting until at least December before we see another boost.

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.

Disclaimer: The rates above were gathered on Oct. 25, 2016. Before applying, check with the bank or credit union of interest to confirm the offer still stands.

*Contact the credit union for nationwide eligibility requirements.