Opening a 3-month certificate of deposit is a quick way to earn a return on your savings since the average rate is about 0.20% APY. But where can you find the best 3-month CD rates? Well, it’s not entirely about rates. Yes, the best 3-month CD for you should have high-interest yields, but it should also have low early withdrawal penalties and minimum balance limits that fit your budget.
To simplify your research process, we’ve found six institutions offering the best 3-month CD rates and terms. Afraid of commitment? No problem. This product only asks for three months. It’s a great way to get your investing feet wet without the worry of having money tied up for too long.
The 6 Best 3-month CD Rates
- Ally Bank: Best for the new investor on a budget
- Radius Bank: Best APY for a $1,000 investment
- TIAA Bank: Best APY for $5,000 investment
- Popular Direct: Best for experienced investors with $10,000 or more
- Synchrony Bank: Best for the tech-savvy investor
- Barclays: Best for existing customers
|Bank||APY||Minimum Deposit||Early Withdrawal Penalty|
|Popular Direct||1.50%||$10,000||89 days|
What is a 3-month CD?
A 3-month CD is a type of federally insured deposit product with a fixed interest rate and a fixed date of withdrawal three months after the deposit. In exchange for agreeing to keep your money in the account for three months, you get higher interest yields than most traditional savings accounts.
Why might you want a 3-month CD? CDs range from one month in length up to 60 months. The short-term options like a 3-month CD, have the benefit of a shorter commitment. If you cancel before the term of a CD is up, the institution typically charges you a penalty that can cancel out the earnings. So, if you don’t have much money saved yet and aren’t fully comfortable locking it up long-term, short-term CDs are a good option.
Short-term CDs can also help you if you have trouble saving money, as the penalty will provide some motivation to leave it alone. After you complete a 3-month CD, you can work your way up to longer terms and larger returns from there.
CDs vs High-yield Savings Accounts
High-yield savings accounts pay more than the average 0.09% APY that comes with a traditional savings account. In fact, several institutions offer an APY in the ballpark of 1%, and some even surpass 2%. Additionally, high-yield savings accounts offer immediate access to your money, unlike a 3-month CD where you are supposed to leave the money alone.
Easier access to your money sounds like a benefit, but it isn’t necessarily a good thing. The withdrawal limitations on CDs can help you earn more because you’re less likely to withdraw the money. So a CD is a better option if you prefer to have your money locked away for a while. A high-yield savings account will be good if you aren’t concerned with your saving ability and can land a high APY without restricting balance requirements or expensive account fees.
CDs vs Investment Accounts
Other investment options include long-term retirement solutions like standard brokerage accounts and Individual Retirement Accounts (IRAs). With a standard brokerage account, you hire an investment company or brokerage firm to invest your money in mutual funds, bonds and stocks. Similarly, you can open IRAs at most banks and investment firms and they invest your savings in bonds, mutual funds, index funds and stocks. Both types of investment accounts can be risky depending on the chosen investment route, and they can present steep early withdrawal penalties and tax considerations. A CD is a low-risk, short-term, high-yield investment alternative good for those who want to see their returns sooner.
3-month CDs vs 6-month CDs
When considering a CD, you may go back and forth between the different term lengths. As a general rule, the longer you leave your money in the CD, the higher the APY you can get. On average, a 3-month CD offers a 0.20% APY and a 6-month CD offers a 0.35% APY. With the clear advantage to earn more with the 6-month option, the question is, how long are you comfortable with locking up your money? If you can afford to let it sit for six months without touching it, you can earn more. However, be sure you won’t need it early or you’ll face the withdrawal penalties, which are no fun.
The Six Best 3-month CD Rates on the Market
Ally Bank: Best for the new investor on a budget
Ally Bank is an award-winning online bank that offers a comprehensive suite of products, including 3-month CDs. Its $0 minimum balance makes it an accessible option, and the 0.75% APY gives a higher return than a standard savings account. The penalty for early withdrawal is 60 days of interest, which is also less than all of the CDs on this list, making it an excellent option for those new to investing. Ally also offers a 0.05% incentive reward to renew CDs, boosting future yields.
Radius Bank: Best APY for a $1,000 investment
Radius Bank won the 2018 Financial Capability Innovation Award for its dedication to going above and beyond in service to its community. The company prides itself on delivering superior products and services to help clients meet their goals. It’s no surprise that it offers a 3-month CD with an affordable $1,000 minimum balance at 0.85% APY. However, the penalty for early withdrawal on a 3-month CD at Radius is three months of interest, which is the entire earnings on the CD (ouch!). This could be a good option as long as you stick out for the three months.
TIAA Bank: Best APY for $5,000 investment
TIAA Bank offers CDs backed by its “Yield Pledge Promise” to review competitors’ rates weekly and remain in the top 5% of competitive accounts. Its current rate of 1.35% is of the highest APY offered for a bank CD. What is the catch? Well, the minimum balance to open a CD with TIAA is $5,000, so you will have to have a little stockpile of savings. Furthermore, if you need to pull out your money early, you’ll have to say goodbye to any interest you’ve earned.
Popular Direct: Best for experienced investors with $10,000 or more
Popular Direct believes in keeping financial transactions simple and being transparent in business. It has an easy-to-navigate website that quickly shows information about rates and products. However, deep pockets are required to invest here as there is a $10,000 minimum balance requirement. The upside? A 1.50% APY. The early withdrawal penalty at Popular Direct is 89 days’ interest, which is pretty much all of the interest accrued, so stick with it.
Synchrony Bank: Best for the tech-savvy investor
Synchrony Bank prides itself on being a leader in online innovation and security. Living in a digital age with more and more business being transacted online, this 100% online bank understands that information safety is a priority. A 3-month CD at Synchrony Bank requires a minimum balance of $2,000 and will yield 0.75% APY with an early withdrawal penalty of 90 days’ interest, which would likely be the entire earnings on the CD. Again, it’s a competitive option but one that won’t do you any good if you opt out early.
Barclays: Best for existing customers
Lastly, Barclays began 300 years ago in London. This globally recognized brand has always been driven by strong values. Its 3-month CD requires $0 minimum balance, making it an option for investors of all levels. While its APY of 0.35% is the lowest in this list, it is three times the average of standard savings accounts and could, therefore, be a solid option for first-time investors with smaller amounts to invest. The early withdrawal penalty here is also 90 days.
The Final Word
If you can put funds on “lock down” for a couple of months but aren’t sure how long, consider a 3-month CD as a way to get started with investing. You can make a little money in the short term and help increase your saving power, allowing for larger future investments. A 3-month CD is a great option for somebody who is new to investing, looking for a low-risk way to earn extra money on their savings, or struggling to save for a special occasion such as a wedding or vacation. Cross-check our list against your savings and goals to find the best option for you.