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Three-month CD rates work just like other CDs but have a shorter, three-month term. Once you open a three-month CD and deposit your money, you’ll earn a fixed interest rate for the entire three-month period. This rate is determined by the annual percentage yield (APY) that was advertised when you opened the account.
Interest on three-month CDs is usually compounded either daily or monthly, with most three-month CDs compounding daily because of their short term. The more often interest is compounded, the more you’ll earn, so it’s best to choose a CD that compounds interest daily for the highest return.
When the three-month period ends, the CD matures. You can then withdraw your initial deposit plus the earned interest or choose to reinvest it. Keep in mind that if you withdraw your money before the maturity date, you might face penalties or lose some of your interest earnings.
According to FDIC data, the average APY for a three-month CD is 1.53%. However, some three-month CDs can offer rates as high as 5% APY.
The table below compares the average three-month CD rate with other short-term CD rates.
Average APY for short-term CDs
| Term length | Average APY* |
|---|---|
| 1 month | 0.23% |
| 3 months | 1.53% |
| 6 months | 1.82% |
*Average APY data is sourced from the FDIC, which last updated these figures on August 19, 2024.
If you invest $1,000 in a three-month CD with an average APY of 1.53%, you’ll earn $3.80 by the end of the term. If you choose a three-month CD with a significantly higher APY of 5%, your earnings will increase to $12.27 over the same period.
Refer to the table below to explore the potential earnings with a high APY of 5% on a three-month CD.
Earnings on a 3-month CD with a 5% APY
| Deposit | Interest earned | Total ending balance |
|---|---|---|
| $1,000 | $12.27 | $1,012.27 |
| $5,000 | $61.36 | $5,061.36 |
| $10,000 | $122.72 | $10,122.72 |
| $20,000 | $245.44 | $20,245.44 |
| $50,000 | $613.61 | $50,613.61 |
The calculations shown are just a simple example. Always seek advice from a qualified professional before making important financial decisions.
When researching CD investment options, consider the following factors.
APY refers to how much you will earn in interest on your deposit. Currently, the best three-month CD rates tend to be between 5.00% and 5.75%. Some credit unions even offer CDs with rates of 6% or higher.
Some banks charge an early withdrawal penalty if you take any funds out of your CD before the maturity date. In the case of a three-month CD, that means you might pay a penalty if you make a withdrawal in the first 90 days. If you want to ensure easy access to your funds without paying a penalty, look for CD accounts that don’t charge a fee or charge only a small fee.
Interest on CD accounts compounds monthly or daily. Daily compounding tends to result in slightly higher earnings, but it’s only noticeable if you have a large deposit balance. Even so, it’s a good idea to opt for an account that compounds daily whenever you can.
Choose a bank that you’re comfortable with when it comes to the security of your information and funds. Read reviews, check reports to the Better Business Bureau and select a bank that is FDIC-insured for ample peace of mind.
Review the requirements for minimum deposit amounts. Some banks only offer high-yield CD accounts when you can deposit a certain amount, such as $5,000 or $10,000 or more. Other banks offer these accounts with no minimum requirements — the amount you have on hand to deposit will help decide which account is right for you.
Review the CD term before you deposit your funds. A three-month CD has a term either for three months or 90 days — this can make a difference of a few days in the actual maturity date for the CD. Ensure you know when your maturity date is so you don’t accidentally withdraw funds before then.
To open an account with the best three-month CD rates:
Select an account and bank that’s right for you and fits your needs.
Online banks tend to offer the best rates, and you can complete these forms online.
To open your account, you’ll need proof of identity such as a state-issued photo ID. You’ll also typically need to provide a residential address and some other contact information.
Depending on the bank you choose, you can fund your account with cash, a money order or a check, an electronic funds transfer, or a debit or credit card.
Because three-month CD rates are much higher than the national average for traditional savings accounts, they can be a good option for putting your money to work when you know you won’t need it right away. Short-term CDs can be an easy way to earn interest on savings that you will need later in the year, as they don’t tie your money up for many months.
For example, a high-school student who has graduation gift money could invest it in a short-term CD and have access to the principal and interest earnings before the end of their first college semester. Or, someone looking to buy a home in a few months could dock their savings in a CD to hold it safe and steady while earning a bit more money to add to their down payment fund.
Many other savings options exist. Consider some alternatives to three-month CDs below.
If you can keep your money in a CD longer without needing it, you might consider other CD terms. Average 90-day CD rates tend to be similar to three-month CD rates, but you can also research options for six-month CDs and CDs with terms of several years to see how much you might save.
Typically, long-term CDs, like one-year CDs, outperform the rates available with short-term CDs. However, in some markets, short-term rates are often higher on average.
Traditional savings accounts allow you to earn interest on your deposits while offering more access to your money. Some savings accounts even allow you to make withdrawals at ATMs.
The average savings account APY is under 1% — and some banks only offer a fraction of a percentage point in APY. However, you can find high-yield savings accounts that offer 3% to 5% APY, even without a minimum deposit amount.
Money market accounts are like a cross between savings and checking. The best money markets typically offer interest rates that are higher than most checking accounts and provide some check-writing capabilities. Average high-yield money market interest rates currently tend to run between 2% and 5%.
The best short-term CD rates fluctuate, so you will need to research rates when you’re ready to invest. However, some of the best rates are offered by online banks and credit unions.
Yes, certificates of deposit are secure, safe and conservative investments. They don’t come with a lot of risk, as the bank guarantees the published APY for the term of your CD. You can enhance safety by choosing a bank that is FDIC-insured.
A short-term CD may be worth it for you if you have savings on hand that you know you won’t need for the next 90 days. If you are stuck between a short-term CD or a savings account, a CD could be a better option because they typically offer a higher interest rate.
Many banks currently offer 5% CDs. Online banks and credit unions tend to offer the highest three-month CD rates, as they do not have overhead related to branch locations and can pass those savings on to account holders in the form of higher interest rates.
Currently, the highest three-month CD rates are around 5.5%. You can find rates ranging from 3% to 5.75%—and you may be able to find CDs with rates of 6% or more with some other types of financial institutions like credit unions. However, rates constantly change, so always read the fine print with a bank to find out what the rates are when you’re ready to make a deposit.
Sarah Stasik is well versed in personal finance thanks to her previous role as a Revenue Cycle Manager for a Fortune 500 healthcare company. Using her inside knowledge and expertise, Sarah often covers topics ranging from insurance and the economics of private healthcare to personal finance and small business management.
With more than a dozen years of writing experience, Sarah has tackled niches that range from technical advances in fintech to personal budgeting challenges. She has covered topics such as insurance and the economics of private healthcare, small business management and accounting, and credit and savings. Her writing focuses on making complex or seemingly daunting financial topics more accessible and providing helpful and relevant resources for readers.
