| Product | AVG | Top 1% |
|---|---|---|
| 6 Month CD | 3.73% | 5.31% |
| 1 Year CD | 2.63% | 5.30% |
| 2 Year CD | 1.58% | 4.85% |
There are instances when short-term CDs are very useful. For example, if someone wants to earn interest on money that they need within a few months for a down payment on a house or car, a 3-month CD can fill that void quite well. Due to the current economic environment, yields on three-month CDs are very attractive. The best high-yield 3-month CD is currently yielding 5.51%, which is comparable to a high-yield savings account.
When you open a CD account, you agree to deposit your money for a set term, in this case, three months in exchange for a fixed rate, or APY. The advantage of a 3-month CD is that the money is only tied up for a few months, and the disadvantage is the opportunity cost of forgoing a longer-term CD that may offer a higher APY. As of today, the average yield for 3-month CDs is at 1.74% and the best 3-month CD is offering a yield of 5.51%. This rate is multiples higher than the average yield for a conventional savings account, which is currently at 0.45%.
For someone who can afford to lock up their money for three months, this is a very good alternative, with the upside being receiving a fixed yield for that term period. One very important point to consider is the early withdrawal penalty. For a 3-month CD, the penalty can range from 30 days of interest to all interest earned. Also, the CD will auto-renew for the same term length, but the rate may not necessarily be the same as economic conditions may change. It is important to be aware of when your term ends, as banks will only allow a short window of 5-7 days to cancel your CD without potentially incurring early withdrawal penalties.
The interest rate on a CD is determined by the amount invested, the term of the CD, and the APY. There are plenty of CD calculators available online to get a good idea of how much interest you will earn based on the amount, term, and compounding frequency.
If you put $2,000 in a CD with a 3.50% APY compounding annually, you will earn $70 in interest over the course of the first year. This is an easy calculation since you simply multiply the APY by the amount of your initial investment. When looking at CDs with periods longer than one year or CDs with a different compounding frequency, it's crucial to remember that the total interest earned will be different.
CDs are an excellent option for someone who has extra money laying around or wants to have their money work a bit harder and can lock it up for a short three months in a CD. When searching for the best high-yield 3-month CD, keep in mind that you should not access your funds for the duration of the term, or an early withdrawal penalty will be assessed. This may cause you to lose part or all of your interest depending on the bank's terms. Here are some important things to keep in mind when evaluating CDs:
Shop around: Comparing CD rates at various banks is an easy way to find the best CD for your needs. Keep in mind that you don't always have to have all of your CD accounts with the same bank, as many online banks offer higher rates than traditional banks. Luckily, we've done the hard work for you and you can search BankGrader's site for information on from thousands of banks.
Ask about the early withdrawal penalties: Leaving your money in your CD for the full length of the term allows you to earn the maximum interest. Withdrawing your money early will most likely cause you to lose part or all of your interest, as banks typically charge penalties. Early withdrawal penalties vary from bank to bank. Make sure you know what yours will be in case you need early access to your money.
| Your money is only tied up for three months, which is a short amount of time. | If you withdraw your money before the three months are up, you will most likely incur an early withdrawal penalty, which may cause you to lose some or all of the interest earned. |
| As long as you are within the FDIC or NCUA limits, your money is safe and secure for the entire three months. | If rates rise, you have to wait until the end of your term to renew into a CD with a higher APY. |
| Your rate is locked in for three months. If rates go down, your rate will not change. | |
| The rates currently being offered for 3-month CDs are comparable to longer term CDs, giving you more flexibility and not forcing you to lock up your money for a long time. |
Personal Savings Accounts
A savings account is a type of interest-bearing, depositary account available at banks and credit unions. Banks typically pay a variable interest on deposits but may limit the number of withdrawals per month. These accounts are highly liquid but in most cases, offer lower yields than a 3-month CD because money is not locked up for any specific amount of time.
Longer Term CDs
Longer term CDs such as a 6-year, 1-year ,and 15-month CDs currently offer slightly higher yields but require you to commit your funds for longer periods of time. If you prefer the security of a fixed rate for a longer term, these CDs may be an excellent alternative to a 3-month CD.
Checking Accounts
A checking account is a form of transactional account that can be opened at a bank, traditional or online, or a credit union. Checking accounts allows you to deposit funds and then withdraw from them to pay bills or make purchases. Keep in mind that the money in your checking account is money that you intend to use in the short term to meet your daily expenses. Unlike a 3-month CD, checking accounts pay little to no interest.
High-yield Savings Accounts
A high-yield savings account is a form of savings account that pays a much greater interest rate than other types of savings accounts. Rates of 3.53% and higher are now available from online banks. High-yield savings accounts are the most similar to what a 3-month CD might yield with the major difference being that yields are variable whereas yields on a 3-month CD are fixed for the duration of the term.
Money Market Accounts
A money market account (MMA) is a type of interest-bearing savings account that also allows you to use a debit card and write checks. MMAs generally limit the number of purchases and transfers to six per month, although ATM withdrawals are typically unrestricted. In general, MMAs offer lower yields than a 3-month CD.
Annual Percentage Yield (APY): The total interest you receive on money in 3-month CD over the course of a year is expressed as an APY. The interest rate on an account is only one component of the APY, which also considers how frequently your interest compounds. The annual percentage yield (APY) of an account provides a more precise estimate of how much money your 3-month CD will earn.
Minimum Opening Deposit: This is the lowest amount of money you must deposit to open your 3-month CD account.
Interest: Interest is the money you earn from depositing your cash with a bank into your 3-month CD. When you deposit money with a bank, the bank borrows it from you and will lend a portion of it to clients or other banks, and the money they pay on your 3-month CD, is the interest.
Compound Interest: Compound interest is the interest you earn on interest you have already been paid. This may be demonstrated using simple math: if you have $100 and it generates 5% interest every year, you will have $105 at the end of the first year. You'll have $110.25 by the end of the second year, because you earned interest on the $105, and so on and so forth.
Early Withdrawal Penalty: An early withdrawal penalty is a fee banks may charge if you withdraw funds before your 3-month CD matures. Withdrawing your funds before the end of the term may cause you to forfeit a portion of your accrued interest and possibly some of your principal.
In the past, the longer the term of a CD, the higher the yield. That was traditionally the exchange for a bank borrowing your money for a prolonged period of time. As the economic environment has changed, shorter-term CDs are offering very attractive yields nowadays. For example, the best 6-month CD has a yield of 6.00% with the national average at 2.48% based on our research. With rates at a recent high, you can lock up your money for a short period and still reap the benefits of a competitive APY. Here are some of the best 6-month CDs for April 2025:
A one-year CD locks up your money for a somewhat extended period of time, which makes them a convenient place to park money that isn't immediately needed and can possibly earn a higher APY. The longer term and its early withdrawal penalty force you to save, which can be a very good feature for some people. The top one-year CDs are offering yields as high as 5.50% with the average being 2.54%. Take a look at some of the best one-year CDs offered by banks and credit unions for April 2025.
In instances where someone is building a medium-term CD ladder, a 15-month CD can be very beneficial because the rates are generally a bit higher than a 1-year CD and fit perfectly between a 1-year and an 18-month CD. Based on our research, the best 15-month CD on the market is yielding 5.50% with the national average at 2.67%. Here are some of the best 15-month CDs offered by banks and credit unions for April 2025.
Our editorial staff continually updates the information contained on our website. Our editorial staff has analyzed virtually all of the banks and credit unions that it follows, and it does weekly rate analysis for more than 250 prominent banks and credit unions. These institutions were chosen because they provide competitive APYs, low fees, and other factors we find important. These banks and credit unions often provide accounts that are available nationally. All of these banks are FDIC-insured, and all of these credit unions are NCUA-insured. Choosing an FDIC-insured bank or an NCUA-backed credit union assures that your money is protected as long as it stays within insurance limits and requirements.