Best 3-Year CD Rates of 2025
Written by Theresa Stevens
A 3-year certificate of deposit (CD) is a type of deposit account that allows you to earn a fixed interest rate on your balance for three years. While a CD can be a safe option for growing your savings, if you need to access the funds before the three years are up, you may have to pay a penalty.
Learn more about 3-year CD rates at various banks and credit unions, as well as what to consider before opening an account.
DepositAccounts strives to produce high-quality content that exceeds your needs and expectations. Content is fact-checked to ensure accuracy and objectivity. DepositAccounts tracks thousands of CD rates from financial institutions across the country to identify the best daily rates, paying attention to early withdrawal fees and rate stability.
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What is a 3-year CD?
A 3-year CD is a type of savings account in which you hold your cash for a period of three years. In exchange, you’ll receive a rate that may be higher than what you could get on a regular savings account. The rate on a CD is usually fixed, making it easy to predict your earnings.
You can find 3-year CDs at many banks and credit unions.
One caveat: If you need to access your money before your CD term is up, you may have to pay an early withdrawal penalty, which is typically equal to a few months’ interest. You'll need to be fairly confident that you won't need to tap into your funds before the three years are up.
How to find the best 3-year CD rates
Finding the best 3-year CD rates involves comparing rates among different banks and credit unions. Check traditional and online banks to see which one offers the best CD rates.
When comparing 3-year CD rates, pay attention to any minimum deposit requirements and monthly fees the bank may charge. Also, make sure the bank is protected by Federal Deposit Insurance Corp. (FDIC) insurance. Credit unions are covered by the same type of deposit insurance through the National Credit Union Administration (NCUA).
You should be able to find this information on the bank or credit union’s website, or you can verify it by using the FDIC’s BankFind Suite or the NCUA’s search tool.
Pros and cons of a 3-year CD
Pros
- It’s a safe place to store funds. CDs are safer, less volatile investments than stocks. You don’t have to worry about your balance dropping because of market swings.
- Your rate is usually fixed. Rates are typically fixed for the entire CD term, allowing for predictable returns.
- CD rates may be higher than regular savings account rates. You may earn a higher rate in a CD than you would in a regular savings account.
Cons
- You can be hit with an early withdrawal penalty. If you need to access the funds before your CD matures, you may need to pay a penalty typically equal to a certain number of months’ interest.
- You’ll need to consider interest rate risk. If rates rise after you lock in a CD rate, you may lose out on higher returns.
- Inflation may erode your earnings. If your CD earnings don’t keep up with inflation, your savings could lose purchasing power over time.
Is a 3-year CD a good idea?
A 3-year CD is worth considering if you want to lock in an interest rate, and you don’t need to access your savings for at least three years. If you do save money in a 3-year CD, make sure you set aside other funds in a more liquid account, such as a savings account, in case unexpected expenses come up.
3-year CD alternatives
Shorter-term CDs
If you don’t want to lock away your money for three years, consider CDs with shorter terms, such as:
Longer-term CDs
Savers who have longer-term goals could consider a 5-year CD. Some financial institutions offer CDs with terms as long as seven years.
High-yield savings account
If you want to earn a good rate while still being able to access your money when you need it, a high-yield savings account could be a better option.
Frequently asked questions
How is a 3-year CD taxed?
The interest you earn in a 3-year CD is taxable the year the interest is paid. For example, if you earn $100 in interest for each of the three years, you’ll pay taxes on the $100 of interest each year. If you earn more than $10 in interest in any given year, your bank or credit union will send you a 1099-INT form, which you’ll need when you file your taxes. Even if you don’t receive a 1099-INT form, you’re still required to report interest payments of $10 or more.
How much does a $10,000 CD make in three years?
It depends on your interest rate and how often the CD compounds interest. Here’s what a $10,000 CD could earn in three years if interest compounds daily:
CD term: 3 years
APY: 4.00%
- Year one: $408.08
- Year two: $424.74
- Year three: $442.07
At the end of the three years, you would have earned a total of $1,274.89 in interest, and your balance would have grown to $11,274.89.