Best 3-month CD Rates for May 2024

Looking for the best 3-month CD rates to maximize your savings? Compare the top rates in the market with this helpful guide.

Three-month certificates of deposit (CDs) can be a great option for those looking to earn higher interest rates than traditional savings accounts, but that is not the only reason to consider them. This short-term investment option is ideal if you want to earn some extra interest without a long-term commitment or taking too much risk.

With the fluctuating economy and changes in interest rates, it's important to stay informed about the best CD rates available. Benzinga reviewed the current best 3-month CD rates based on annual percentage yield (APY), minimum deposit, customer service and more. Make the most of your short-term investments with the top rates available.

Quick Look: Best 3-month CD Rates Today

• Best for Overall Terms: MutualOne Bank — 5.65% APY
• Best for High APY: TotalDirectBank — 5.51% APY
• Best for Online Banking: Popular Direct — 5.30% APY
• Best for Minimum Deposit Amount: Western Alliance Bank — 5.26% APY
• Best for Credit Union Membership: America First Credit Union — 5.25% APY

Best 3-month CD Rates

Here are some of the top 3-month CD rates currently available, so you can make an informed decision and make the most of your money.

1. Best for Overall Terms: MutualOne Bank

MutualOne Bank is a community-focused financial institution that has been serving the MetroWest area of Massachusetts for over 130 years. With a strong commitment to providing personalized and innovative banking solutions, MutualOne Bank has built a reputation for excellence in customer service and community involvement.

MutualOne Bank's 3-month certificate of deposit offers a 5.65% annual percentage yield with a low $500 minimum deposit. The account must be funded with new money to the bank and interest is paid at maturity.

To open a CD account, you will be required to provide the following: a government issued ID, your Social Security number, a valid email address and the means to fund the account (credit/debit card, checking account or savings account.)

2. Best for High APY: TotalDirectBank

TotalDirectBank offers a high APY of 5.51% on its 3-month CDs, which is among the highest available 3-month CD rates in the market. However, the minimum deposit of $25,000 is high compared to competitors.

To open a CD with TotalDirectBank, you must be a U.S. citizen or a resident alien with a valid Social Security number, a valid email address and a U.S. mailing address.

TotalDirectBank's CD is a good fit if you have substantial cash to invest in a short-term CD and earn a competitive interest rate.  

3. Best for Online Banking: Popular Direct

Popular Direct's three-month high-yield CD has a competitive 5.30% APY. It requires a minimum deposit of $10,000, which is relatively higher than most competitors. 

To get started, you must create an account online. Popular Direct will ask for the following details when setting up your account: personal details, contact information, government issued ID and employer information.

4. Best for Minimum Deposit Amount: Western Alliance Bank

Western Alliance Bank’s three-month CD, powered by Raisin, offers a 5.26% APY. With a low minimum deposit requirement of just $1, it provides unparalleled accessibility. The user-friendly savings platform Raisin allows you to easily discover, fund and manage multiple CDs and high-yield savings accounts from a diverse range of banks and credit unions. The Western Alliance Bank's three-month CD's low barrier to entry allows anyone to get started investing.

5. Best for Credit Union Membership: America First Credit Union

The America First Credit Union's three-month certificate boasts a 5.25% APY and a low minimum deposit of $500. This combination of high interest and low entry barrier makes this CD a great pick if you don't mind joining a credit union. 

Also, if you prefer in-person banking, the convenience of access to one of the 124 branches in Arizona, Idaho, Nevada and Utah adds further appeal to the America First Credit Union three-month certificate of deposits.

What Are 3-month CDs?

A 3-month certificate of deposit is a financial instrument that gives you a fixed interest rate for three months. Unlike a regular savings account, you usually can't take out your money early without a penalty. The good news is that a 3-month CD usually pays more interest than a regular savings account, especially if you look for the best CD rates. However, the downside is that your money is locked up for three months and you might miss out on better rates if they go up during that time.

How Do 3-month CDs Work?

When you put money into a 3-month CD, you agree not to take it out until the three months are up. In return, you get a fixed interest rate that's usually better than a regular savings account. At the end of the three months, you can either take out your money and the interest you earned or renew the CD for another term.

The interest rate you get on a three-month CD depends on the bank and the market conditions. Usually, longer-term CDs have higher rates than shorter-term ones. But in some cases, the best 3-month CD rates are higher than the best one-year CD rates. This unusual situation is known as an inverted yield curve and may indicate that investors expect lower inflation and economic growth in the future and so, prefer to lock in their money for longer terms at lower rates.

One reason for this scenario could be the Federal Reserve raising its benchmark rate, which affects the rates of different financial products, including CDs. When the Fed increases its target rate, banks might adjust their CD rates, but not all at once or by the same amount. Some banks might offer better rates for shorter-term CDs to attract more customers while keeping longer-term CD rates lower to avoid paying too much interest in the future as they expect the Feds may drop its rate again. 

Pros and Cons of Investing in 3-month CDs

Depending on your financial goals and preferences, there are benefits and drawbacks of investing in 3-month CDs.

Benefits of Investing in 3-month CDs

• Higher interest rates: Three-month CDs typically offer higher interest rates than regular savings accounts.
• Fixed interest rates: You can lock in a guaranteed rate of return on your money, which does not change regardless of the market fluctuations and the bank's decisions.
• Low risk: Three-month CDs are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA) up to $250,000 per account type so that you don’t lose the insured amount if the bank or the credit union fails.
• Short term: You can access your money relatively quickly, compared to longer-term CDs that can lock your money for years.
• Diversification: Three-month CDs can help you diversify your portfolio, as they are different from other types of investments, such as stocks, bonds or mutual funds.

Risks of Investing in 3-month CDs

• Early withdrawal penalty: You will lose some or all of the interest you earned if you withdraw your money before the term ends. This penalty can reduce your overall return and limit your liquidity.
• Low returns: Compared to other types of investments, such as stocks, bonds or mutual funds, CDs have low returns. Still, CDs also bear lower risk and volatility.
• Inflation risk: The purchasing power of your money can decrease over time, as the prices of goods and services increase. This situation can erode the value of your money and reduce your real return.
• Opportunity cost: You can miss out on other investment opportunities that can offer higher returns or better features, such as flexibility, liquidity or tax benefits.

How to Choose the Best 3-month CDs

Before diving into a 3-month CD, consider the following:

• Customer service: Choose a bank or credit union with excellent customer service for your CD account as it will come in handy when you have issues. Check online reviews and ratings to see how others rate the service. Consider support availability through phone, email, chat or local branches.
• The bank’s credit rating: A high credit rating indicates financial stability and an institution’s ability to repay obligations. Check ratings from agencies like Standard & Poor's, Moody's or Fitch.
• APYs: When looking for the best 3 month CD rates, choose those with a higher APY. The APY reflects the interest rate and compounding frequency, determining how much you earn from your CD. A higher APY means more earnings. 
• Minimum deposit requirements: A lower minimum deposit makes it easier to start saving with a CD. Still, consider that some institutions offer higher APYs for larger deposits. Balance the initial investment with the potential return.
• Withdrawal penalties and restrictions: Withdrawal rules differ among institutions, depending on amount, timing and frequency. Less or no penalties mean you have more flexibility to access your funds in case of emergencies or opportunities. Some institutions may offer higher APYs with stricter withdrawal terms, so consider the balance between liquidity and return.
• Maturity and grace periods: The maturity date is when your CD term ends, allowing you to withdraw or renew. The grace period, following maturity, lets you make changes without penalties — like withdrawing or adding funds. These periods vary, ranging from days to weeks. Longer maturity and grace periods give you more time to decide what to do with your CD.

How to Open a 3-month CD Account

Opening a 3-month CD is easy:

• Choose a bank or credit union with a favorable 3-month CD rate.
• Fill out an online or paper application, providing personal and financial information.
• Deposit the required amount via transfer, check, cash or debit card.
• Review and sign the CD agreement detailing terms like APY, minimum deposit and more.
• Get a confirmation email, letter or certificate of deposit as proof of your account.

Alternatives to 3-month CDs

Consider these alternatives to 3-month CDs:

• Savings accounts: They are usually more liquid than CDs and offer flexibility with withdrawals but may have lower interest rates.
• Money market accounts: Similar to savings accounts, money market accounts may require a higher minimum balance and offer higher rates. Some institutions may impose transaction limits.
• Longer-term CDs: These CDs come with longer terms like six months to five years. While they typically have higher rates, they also lock your money for longer.

Earn With the Best 3-month CDs

Three-month CDs can provide a rewarding savings opportunity with fixed returns. When selecting the best option, consider the terms and the bank involved. You may explore alternatives such as savings accounts or money market accounts if needed.

Frequently Asked Questions