5.96% 5-year CD at Michigan CU

The Tandem Federal Credit Union has CD rates as high as 5.96% APY for 5-years. Even the shorter term CDs have very high rates. Here's a list of the current rates:

APY     Term
4.67%   6  months
4.93%   12 months
5.19%   24 months
5.44%   36 months
5.96%   60 months

There are no mention of minimum deposit requirements or early withdrawal penalties.

This credit union has a very restrictive field of membership which is primarily limited to employees of a few dozen employers in Michigan.

Thanks to the reader who informed me about this deal.

What's the Best Certificate of Deposit Term?

If you are eligible to join, you'll have to decide what is the best term. Even with the high rate of 5.96%, is it worth locking your money for 5 years? The 4.93% 1-year CD is only about one percent less. By next year, 7% CDs may be common.

The other factor to consider is the early withdrawal penalty. The typical penalty for CDs of over one year is 6 months of interest. Sometimes I've seen penalties for 5-year CDs as low as 3 months of interest. In these cases, a 5-year CD that pays one percent more interest than a 1-year CD may be worth it. If rates dramatically increase, you can always break the CD without much cost. You can then quickly recover the cost with the new higher interest rates. However, if rates don't rise fast, you're sitting pretty earning a high interest rate.