Point of Interest
When it comes to CD rates, 3-year CD rates start to hit the peak APYs for many financial institutions. Those solid rates and low or no minimum deposit requirements make 36-month CDs a solid option for investors.
If you’re looking for a way to boost your savings, then a high-yield CD is a great place to start. Unlike traditional savings accounts, the best 3-year CDs give you a much higher annual percentage yield. The national rate averages change often but they start at 0.77% APY and are capped at 1.70% APY for conventional 3-year terms. Choosing a high-yield CD goes beyond this and offers you a much better return on investment. To get you started, here are four of the best 36-month CDs for 2019, sourced from top banks online and conventional, from across the country.
The 4 best 3-year CDs of 2020
- TIAA Bank — Best for yield promise
- Marcus — Best for rate guarantee
- Discover — Best IRA CD
- Ally Bank — Best online bank
TIAA Bank — Best for yield promise
While the $5,000 minimum deposit may be a turn-off to some newer or smaller investors, TIAA Bank still delivers a highly competitive APY at 1.50%, regardless of the size of your investment. Additional CD terms are available from 3 months to 5 years and can be utilized in a traditional portfolio or as part of an IRA retirement plan.
TIAA Bank offers a unique yield promise that is sure to help anyone — even those with the fear of missing out (FOMO) — get a better rate. The bank checks rates across the industry every week to ensure the CD rates it offers are within the top 5% of the other rates being offered.
Marcus — Best for rate guarantee
Marcus makes sure it’s offering competitive rates with its 10-Day CD Rate Guarantee. Marcus works to offer the highest APY rates in the industry, and if a higher rate is offered within the first 10 days after you’ve funded your CD account, your rate will be increased. If the rates drop within that 10-day period, you’ll keep the higher rate.
This is on top of the high APY rate of 1.30% on 3-year CDs. The minimum to open an account with Marcus and earn one of the best 3-year CD rates is $500. This makes Marcus an attractive option for investors of all levels.
Discover — Best IRA CD
Discover’s 36-month CD rates are not just available for investors looking to add to a traditional portfolio. These CDs can also be used in a Roth or traditional IRA to plan for retirement. If you’re close to retirement and looking for a no-risk investment that has a great return, Discover’s 3-year CDs are a viable option.
You should note, though, that Discover’s CDs have early withdrawal penalties that are a bit higher than the rest of the industry. The effects of this are minimal at the 3-year level, but if you choose to go with a longer-term CD, it’s certainly something to consider. Overall, the Discover 3-year CD is a solid investment option.
Ally Bank — Best online bank
While Discover lacks slightly with early withdrawal penalties, Ally Bank stands out. This bank has one of the lowest early withdrawal penalties on 36-month CDs, with a penalty of only 90 days worth of interest. If you are planning on withdrawing your money early, you may want to avoid CDs altogether, but this low penalty is a nice safety net if you’re unsure of your future financial needs.
Ally’s 3-year CD rates are competitive at 1.30% and don’t have a minimum deposit requirement to open an account. Upon maturity, you can withdraw your funds at no charge during a 10-day grace period.
Compare the 4 best 3-year CDs of 2020
|Provider||APY||Early Withdrawal Penalty||Minimum Deposit|
|TIAA Bank||1.30%||180 days||$5,000|
|Marcus Goldman Sachs||1.30%||270 days||$500|
|*Rates accurate as of June 4, 2020|
What is a 3-year CD?
A high-yield certificate of deposit is different than a conventional CD. Both are insured by the FDIC or NCUA, but top banks offer you an APY that’s often many times above the current average for conventional CDs, which boosts your savings faster.
CDs usually require a minimum deposit to open, but not always. Deposits can start with as little as $500 and increase from there depending on the institution and term you choose.
A term is a period of time that you agree to leave your funds in the account untouched to get the promised rate when the CD matures. Early withdrawal is permitted, but it usually comes with a hefty penalty. So, it’s best to fund your CD account with money that you’re not going to need during the term that you choose. You can also find CDs with terms as short as three months. CDs also differ from other types of savings accounts, like high-yield savings accounts, savings bonds and IRAs, for example.
3-year CDs vs High-Yield Savings Accounts
High-yield savings accounts offer a much higher APY than conventional savings, but are comparable to certificates of deposit. High-yield savings offer a place to easily access your funds while they grow. There are some limitations imposed by the federal government for the number of withdraws you can make a month, however. They are best for building your emergency savings but differ from CD accounts.
A high-yield CD is a deposit account. It’s not intended for easy access, and early withdrawal imposes a hefty penalty. So, to maximize the benefits, only deposit funds that you will not need for the term of the CD — in this case, 36 months. High-yield CDs offer the best rates over conventional and high-yield savings accounts.
3-year CDs vs Savings Bonds
Like CDs, savings bonds require time and deposit commitment, but here’s the difference: a savings bond is for long-term planning — usually many years. Interest accumulated depends on the bond you choose. For example, Series EE bonds have a low APY but are guaranteed to double over the term. Bonds are not FDIC-insured like CDs but are backed by the full faith and credit of the U.S. government. So, both bonds and CDs are considered relatively safe investments. However, 36-month CDs are more useful, as you can access your fully matured bonds in 36 months, instead of 30 years for bonds’ maturity.
3-year CDs vs IRAs
An IRA is a great choice when you’re ready to save for retirement. They offer better APYs than conventional CDs and earnings are tax-deferred until you retire. As with CDs, early withdrawal incurs a penalty, but IRAs are intended for the long haul. So only deposit funds you won’t need until retirement.
High-yield 36-month CDs offer better rates, but you will receive a 1099-INT each year for annual tax reporting. Unlike IRAs, high-yield CDs can be both short- and long-term and are considered an investment as opposed to a “savings vehicle,” but some high-yield CDs are IRA compatible, though.
Who is a 3-year CD good for?
Investors looking for a short- to medium-term investment with a low entry point, great guaranteed returns and low risk should consider 3-year CDs. Compared to other investments, like money market accounts and savings accounts, 3-year CDs offer less liquidity but often offer higher returns.The returns may be lower than what you could make on other investments like stocks and bonds, but the big difference is the risk. CDs carry almost no risk and are federally insured. CDs are great as a part of a complete investment portfolio to help balance risk or as a standalone investment when no risk can be accepted. CDs are also a good option for people getting close to retirement who want returns without risking their funds.
The Final Word
Whether you seek success or wealth, it’s not going to happen overnight. It takes time to build. Growing your personal savings, whether it’s for a nest egg or something particular in the future, is like that, too. The best 36-month CD rates will get you on the right track to building your savings with some of the highest APYs in the country. There’s no telling how much your savings will grow if you never try.