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3-Month CD Rates
Certificates of Deposit, or CDs (or time deposits) are financial instruments used by consumers to safely generate income and build savings. When you buy a CD, you are technically buying a “deposit” from the bank or credit union and committing a fixed amount of money for a fixed period of time to them. This is good for the bank or credit union because it gives them a fairly sturdy horizon (compared to more liquid deposits like checking or savings accounts) as to how long they can use your funds before returning the principal to you with interest. Because you are purchasing an asset that will be delivered at a later date, you need to make sure the FDIC or NCUA has insured the institution you are purchasing it from so that you are guaranteed your money back.
3-Month CD Rate History – Average APY (%) Rate Trend over Time
What are 3-Month CDs?
3 Month CDs are very short-term products and generally come with the lowest interest rates. Within the 3 month CD category on the rate table above, DepositAccounts also lists CDs with shorter terms such as 7 days. Usually, the shorter the CD’s time frame, the less it will pay in interest – however, financial institutions competing for customers will often break this trend in order to attract attention to the shorter term CD and open new accounts.
Banks and credit unions usually penalize certificate of deposit holders some percentage of interest earned for withdrawing money, or calling the CD, before its maturity date. Because of this penalty factor, consumers investing in CDs often use 3 Month CDs as the first rung on a “mini CD ladder,” which essentially increases the likelihood of those funds making it to maturity (and thus becoming available for use) without incurring a penalty.
What is a Mini CD Ladder?
The mini CD ladder is built by staggering CDs with shorter time horizons, so that every 3 months (or however long between CDs) you will have access to principal and be able to decide whether to reinvest it or use it for something else. For example, if you had $20,000 to invest, you could buy a 3 month CD for $4,000, a 6 month CD, for $4,000, a 1 Year CD for $4,000, an 18 Month CD for $4,000, and a 2 Year CD for $4,000. After the first 3 months, you would have a CD come to maturity and $4,000 available (plus accumulated interest) to rollover into another 2 Year CD. You could repeat the process until you have a 2 Year CD expiring every 3 months. This is a great way to achieve a good bit of liquidity, while earning more yield than you could on a savings account. You can use our certificate of deposit calculator to help you determine the costs and benefits of closing a CD early.