Best 3-Month CD Rates for August 2023 (2023)

You can stash money for a short-term goal in a three-month certificate of deposit to earn a guaranteed return on your deposit. But with some high-yield savings account rates exceeding 5% annual percentage yield,does this short-term CD option make sense?

A three-month CD offers more flexibility than other CD terms, giving you access to your money within roughly 90 days. But it’s still not as flexible as a high-yield savings account, and most three-month CD APYs can’t compete with the best savings account rates.

Still, a three-month CD might fit into your savings playbook, particularly in the current high-rate environment.

What’s a 3-month CD?

A three-month CD is an interest-earning deposit that requires you to lock up your money for a fixed period, or “term,” of three months. In exchange, you earn a fixed rate on your deposit. Unlike savings accounts, most CDs require you to fund them upfront, and don’t allow additional deposits. And if you take out money before the term ends -- in this case, three months -- you’ll typically pay an early withdrawal penalty. This penalty varies by bank, but generally costs a few weeks of interest.

After your CD term expires, you can access your money penalty-free. Most banks offer a grace period of 10 days to withdraw your money before it is automatically rolled into a new CD.

As long as you open a CD at a bank or credit union insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration, your CD funds are protected for up to $250,000 per person and per institution.

Average 3-month CD rates

Typically CDs with terms over one year, also called longer-term CDs, have higher APYs than shorter-term CDs. But in today’s rate environment, shorter-term options like six- and nine-month CDs have higher rates than some longer terms, like three-year CDs.

However, the average three-month CD APY has remained at 2.95% for weeks, based on the banks we track at CNET. That’s much lower than the average high-yield savings rate of 4.60% APY for the online banks and credit unions we track at CNET.

Best 3-month CD rates

A three-month CD can still work in your favor if you want to lock in your rate or eliminate the temptation to touch your funds for a few months. Since this short-term CD doesn’t offer the highest rate you can find, it’s best to compare rates and think about how this short-term CD fits into your goals before opening an account.

The best 3-month CDs

How to build a CD ladder with a 3-month CD

Building a CD ladder adds flexibility to your CD investment plan, while helping you take advantage of higher rates.Instead of putting your entire deposit into a single CD term, you spread your money across several CD terms with staggered maturity dates. That way you’ll have access to your money sooner than choosing one long-term CD. Depending on the current rates when each CD expires, you may roll the funds into a new CD with a different term or choose a new savings option. Some experts recommend a quarterly ladder strategy, starting with four accounts: three-month, six-month, nine-month and 12-month CDs.

Let’s say you start building a CD ladder with these terms and you deposit $500 in each CD. Here’s how it can work with the average CD rates based on the banks we track here at CNET:

By doing this, you have access to your money every three months, but you’re taking advantage of a 12-month interest rate, which tends to be in the higher range, according to Nia Gillett of Gen Y Planning, a financial planning firm.

When your three-month CD matures, you can roll that balance into a new 12-month CD. You’ll do the same when the other terms mature.

“Once you have this strategy going, every quarter you have a new CD maturing, so it creates at least a 90-day period of liquidity,” said Ayesha Selden, a certified financial planner and franchise owner of Ameriprise Financial Services in Philadelphia.

You can also implement a CD ladder with longer-term CDs.

Other savings options to consider

Other interest-earning savings options can offer more flexibility and better APYs than a three-month CD.

For instance, some of the best high-yield savings accounts earn over 5% APY. However,savings account rates are variable, meaning they fluctuate based on the prime rate. Additionally, these accounts typically don’t come with debit card access, and some HYSAs limit how many transfers you can make each month. If you need to access your money regularly, a high-yield savings account might not provide the accessibility you need.

If you need more checking account features, such as a debit card or ATM access, you may opt for a money market account. Most MMAs now offer over 4% APY, but many of these accounts require a higher deposit or minimum balance. You’ll still be able to make regular contributions to the account and withdraw without paying a penalty, but some banks limit how many debit card purchases, online transfers and check transactions are permitted per statement cycle. Like savings accounts, you don’t lock in a rate, so if rates start dropping, you could earn less than you might with a CD.

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