Dedicated to Deposits: Deals, Data, and Discussion

It's Official: 6.25% CDs at Penfed

POSTED ON BY

Pentagon Federal Credit Union
[Update 6/14/07: For latest Penfed certificate rates, please see Penfed's rate table.]

Pentagon Federal Credit Union officially posted its new CD rates this morning, and as expected the long-term CD rates are 6.25% APY. This rate applies to terms of 3 years and over. Thanks to the readers who reported on this last week. It's interesting to note that Penfed mistakenly has 5.25% in their promotional ad. But if you look at the rate table, you'll see it actually states 6.25% APY with a dividend rate of 6.07%

Now the question is what is the best term. In a future post, I'll discuss some of the issues to consider. In this post, I'll describe Penfed and the CDs along with my experiences with joining Penfed and opening a CD last September.

Overview of Pentagon Federal Credit Union

  • Safety - Pentagon Federal Credit Union (Penfed) is the third largest credit union in the nation in terms of total assets. It has $9.2 billion in assets and 714,855 members. It's federally insured by the NCUA (see its NCUA page which includes the web address). It currently has a 3 out of 5 stars (performing) safe-and-sound rating at Bankrate.com. This is down from 4 out of 5 stars when I posted on Penfed in September. Note, there are many ways to extend your insurance above $100K such as using payable on death accounts with qualifying beneficiaries. See this NCUA page for the official details.
  • Eligibility - If you are not eligible to join through various military affiliations, you can become eligible by joining the NMFA association with a one-time fee of $20. Joining NMFA and Penfed can be done at the same time all online. You might want to first see if you are eligible without NMFA membership by starting here.
  • How To Join - In September, I joined Penfed online. You can start the online application here. If you're not already eligible, you'll end up at a page where you can join both the NMFA and Penfed online at the same time. After agreeing to the terms, the application takes you to the funding page. Unfortunately, you can only fund the NMFA membership and a Penfed savings account with a credit card. They make it clear that the funding of the savings account will be considered a cash advance. However, you only have to fund it with $5, so it shouldn't be much of a cash advance fee (my Citi card didn't charge me.) You then select your PIN number. They give you the membership number. Once the application is complete, it informs you that they'll be mailing the account opening materials to your home address. It took 3 days for it to reach my home. It contains a signature card for you to sign and a postage-paid envelope. Even though the application states that your share account will not be valid until they receive your signed form, you can immediately access your account with the PIN you just selected and the membership number they provided. Note, Penfed has recently added extra login security so the initial login process may be a little different now.

Penfed CD Details

The official details of Penfed CDs (called Money Market Certificates) are available at the Penfed CD page and in the CD application (pdf). Some of the important points include:
  • CD can be purchased online, by mail, or by phone
  • Available as a regular CD, an IRA and a Coverdell Education Savings Certificate.
  • The minimum deposit is $1,000 ($500 for Coverdell)
  • The rates are effective through January 31, 2007 (as posted by Penfed). Readers report being told that these rates may last for 3 months
  • The early withdrawal penalty is 180 days of interest for terms of 3 to 5 years. The penalty is 365 days for the 7 year CD. Note, if you redeem a 3, 4 or 5 year CD before 180 days, you'll only lose the interested earned up to that point. So the penalty won't eat into the principal (likewise for the 7 year CD.)
  • Interest is compounded daily and credited monthly
  • After the CD is opened, you may not add funds to the account until maturity date.
  • Partial withdrawals are not permitted except for IRA accounts
  • There are two choices for maturity. First is the automatic renewal option. This has no grace period. Second is the non-renewable option. You can request that they send you a check or transfer the money into your Penfed savings or checking account. This last option seems to be the best especially since you don't want to be locked into a Penfed CD during their low rate period. However, with the automatic renewal option, closing the CD that just renewed wouldn't result in much interest penalty. You would just lose interest for those days since it matured.

My Experiences with a Penfed CD

When I joined Penfed in September and opened a CD, the process went smoothly. I joined and purchased the CD online. Below is a description of the CD purchase process and some important points. Note, there may have been some changes between now and then.

Once you log in, you can select the option from the main menu to open an account. From here you can purchase a CD (what Penfed calls a Money Market Certificate).

Some of the options provided by the online CD application include:
  • Beneficiaries for a POD account.
  • One of three interest payment options. These options include adding it back to the principal, depositing into your Penfed account or sending you a check.
  • One of three payment options at maturity. You can have it automatically renew, have it transfered to your Penfed account or request a check be sent to you.
  • One of two ways to fund the CD online: ACH transfer from another financial institution or by credit card

The ACH transfer option allows you to choose your checking or savings account of another financial institution. You have to enter the bank's routing number and your account number of that bank. The other option is to use a credit card. Both funding options have a limit of $10K. I was told that this can be extended if you call. I'm not sure about these details.

I definitely didn't want to be hit with a cash advance fee on a large amount, so I chose the ACH transfer option and used a high yield savings account as the source. This way the money will continue to earn a high rate of interest until it's debited.

At the end of the application, it states that the certificate agreement will be mailed within 5-7 business days. I received mine and mailed it back without any problems.

Summary

This is a great opportunity for all those looking for a long-term CD. I wasn't expecting Penfed to be so generous with the rates especially since long-term CD rates have been falling so much in the last several months. The best 5-year CD rate currently listed at Bankrate.com is only 5.30% APY. I'm a little worried that this rate may be too good. Penfed is a large credit union that should be able to handle a large influx of deposits and new members. However, the rates are so much better than what's available elsewhere, even Penfed may have trouble and could end these 6.25% rates early.
  Tags: Pentagon Federal Credit Union, CD rates

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Comments
41 comments.
Comment #1 by scott (anonymous) posted on
scott
Thanks for the useful info, A couple of questions. Do you have to open the share account before applying for the CD? Also I was looking at doing $100k ACH from my high yield checking, So that means I have to call? Or do you think it would be simpler to just mail a check? Still would like to give you something for your tip jar, Was wondering if you have considered adding ING's EO as a way to send? Thanks

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Comment #2 by Anonymous posted on
Anonymous
Are you sure that it is a one time fee of $20 to join NMFA? I went to their website and it lists $20 one year $50 three years etc..

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Comment #3 by scott (anonymous) posted on
scott
Is one time
"Joining the National Military Family Association (NMFA)
Services rendered by NMFA consist of membership in the organization with all benefits offered by NMFA. Membership is established on payment of the dues which are not refundable. Dues are tax deductible and may be treated as a cash advance by your card issuer. Membership in NMFA does not need to be maintained in order to maintain membership in Pentagon Federal Credit Union."

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Comment #4 by Banking Guy (anonymous) posted on
Banking Guy
Scott, Yes, you have to open a share savings account first before the CD. The minimum deposit is $5. I would recommend calling for a large deposit. My guess is that they could allow you to open the CD by mail and fund it with a check. Thanks for the tip offer. That's a good idea about ING. I'll look into this.

Anonymous, about the $20 fee for NMFA, I should have mentioned that you only have to be a member of NMFA when you join Penfed. You don't have to keep your membership to NMFA (thanks Scott for helping with this clarification.) Once you're a member of a credit union, you can remain a member regardless of changes to your status .

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Comment #5 by Anonymous posted on
Anonymous
Is there a hard credit pull?

1
Comment #6 by Anonymous posted on
Anonymous
For share saving account there is no credit check. For CD there is no credit check.

For checking there is credit check.

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Comment #7 by Anonymous posted on
Anonymous
Do you have any hunches as to why the rating went down?I have over 100 grand in one of the ownerships. In your humble nonbinding opinion is this dangerous?

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Comment #8 by mh (anonymous) posted on
mh
I just opened a 100K CD by calling. It's faster than by mailing in a check. With a check, they wait until the check is received before opening the CD. But by calling and providing the CSR with your bank's routing#, account#, and a check#, they can process and open the CD immediately.

1
Comment #9 by Anonymous posted on
Anonymous
has anyone tried joining with a debit card instead of credit? should save some money on fees...

1
Comment #10 by Anonymous posted on
Anonymous
I joined with a debit/check card and the money was just withdrawn from my checking account with no fees at all.

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Comment #11 by Anonymous posted on
Anonymous
They pulled my credit on Equifax even though all I opened was the share account and CD. I need to find out if they pull credit each time you buy a CD because I was thinking of getting one each 4, 5 & 7-year.

1
Comment #12 by Anonymous posted on
Anonymous
Usin a debit card works better (no fees)

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Comment #13 by lucho (anonymous) posted on
lucho
I joined with a check card, over the phone. They also asked to do a hard pull.

1
Comment #14 by Anonymous posted on
Anonymous
Do they have to receive the signature card back before you can open a CD? I opened my acct last week and mailed the form back today.

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Comment #15 by Anonymous posted on
Anonymous
I have way too much money with Penfed, nevertheless,so far so good!

I guess my concern is why do they need more external funds, now? Are they have liquidity problems? Bad subprime mortgage loans? Hmm...

It just makes me wonder why they are are offering such a good deal, now?

Just a little paranoid, I guess.

Thoughts?

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Comment #16 by Anonymous posted on
Anonymous
I opened an acct with Penfed this morning over the internet. In an instant return e-mail I was told to call the 800 number to receive a pin#. In this call an officer asked for more info for the account. I was told to call back this pm to receive the pin#. I just returned the call and the process was complete with the pin# to access the acct. I have a large CD that matures from World Savings 12/30. Now I'm ready to purchase the 6.25% 3yr from Penfed. Thanks again..

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Comment #17 by Anonymous posted on
Anonymous
the site seems to suggest you can fund upto a max of 10k for the 3 yr CD - I got that message while applying ( It said min 1000 - max 10,000) - anyone else see this ? or does it not matter and it accepts whatever number you give it ?

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Comment #18 by Anonymous posted on
Anonymous
An unknown qualifier for membership is that if your parents are eligible to join then you can join even if they are not members. My father is a WW2 vet and I joined even though he didnt. It works with no membership fee. rod

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Comment #19 by Anonymous posted on
Anonymous
Re WWII vet - well I guess I wasted 20 bucks minus the tax deduction for a contribution so about $12.00 wasted - my dad was a WWII vet also - didn't think of that. Thanks anyway!

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Comment #20 by Anonymous posted on
Anonymous
Bauer Financial gives Penfed a rating of five stars out of five stars. Their rating is current as of December 2006 based on September 30, 2006 financial data.

Don't know which rating institution is more reliable, but I have a considerable amount of money with Penfed now and am going to deposit even more. Their rate hike timing could not have been better for me.

1
Comment #21 by Anonymous posted on
Anonymous
For those new to penfed, and asking why now, they have done this same thing for the last 3 years, seems like this is their building funds period of the year. Right around xmas, they bump their rate way up last year it was 6%, and usually they keep it that way for a few months. I don't think they will have any problem keeping up with the volume of new funds, although I do plan on making sure my funds are there by Jan 31, why take the chance. There definitely are a wider number of people who know about it thanks to the internet. Anyway I have been with them for a while and never had any problems.

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Comment #22 by Anonymous posted on
Anonymous
A CSR confirmed today, that Hard credit pull is done to almost everyone opening CD by calling CSR and or opening online with amounts > 10K.
Also, they run hard credit pull on every 9th or 10th customer as required by law, for quality control purposes.

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Comment #23 by Anonymous posted on
Anonymous
Does hard credit pull affects one's credit rating?

1
Comment #24 by Banking Guy (anonymous) posted on
Banking Guy
Thanks everyone for your comments. I tried to answer questions and consolidate readers' inputs into a new post here.

1
Comment #25 by Anonymous posted on
Anonymous
Does hard credit pull affects one's credit rating?

9:49 AM, December 29, 2006

It sure does. I opened about 10 new accounts in the last 2 years. Most of them did a hard pull.

My credit score went from 820 to 780.

Go figure! I have no debt...but lots of $$$ in CDs.

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Comment #26 by Anonymous posted on
Anonymous
to 12/29 posting. I have no debt either. So why did the credit score go down after 10 new accounts in past 2 years.

1
Comment #27 by Anonymous posted on
Anonymous
My credit score went b/c of all the hard credit pulls. Your credit score gets dinged if you have too many hard pulls, so I am told.

1
Comment #28 by Anonymous posted on
Anonymous
Are the cd's insured and by whom?

1
Comment #29 by Banking Guy (anonymous) posted on
Banking Guy
Yes, it's federally insured by the National Credit Union Association (NCUA). This can be verified at this NCUA page.

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Comment #30 by Anonymous posted on
Anonymous
I have an account with EmigrantDirect. Can I transfer my money directly from EmigrantDirect into PenFed's 3-year Certificate??

1
Comment #31 by Banking Guy (anonymous) posted on
Banking Guy
I believe EmigrantDirect states that they don't allow you to pull funds using an outside account. However, I've been able to pull money from EmigrantDirect using HSBC's ACH transfer system. So you may be able to fund a Penfed CD using Emigrant's routing number and your account number.

1
Comment #32 by Anonymous posted on
Anonymous
I was able to open five 10k CD's online with Penfed today, all for a term of five years. A CSR told me that you can open as many as you like, for any amount (1k-10k), for any term, even the same. Rather than putting everything into one large CD, opening several small CD's will minimize the interest penalty if I need funds before maturity.

I was also told that there is a 10 day grace period when a CD matures, with notification by mail stating what the new rate will be if I choose to rollover.

1
Comment #33 by Anonymous posted on
Anonymous
Would it be faster to send in both share savings and money market cert applications together?? Why is so important to obtain the PIN before establing the money market cert?

1
Comment #34 by Anonymous posted on
Anonymous
Just a note for those receiveing paper statement, starting Jan, there will be a 50cents charge on paper statement.

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Comment #35 by Anonymous posted on
Anonymous
This sounds like a great deal. I have a cash flow problem. I would like to fund my Penfed CD from a funds from my GMAC CD, which just matured two days ago. But this offer expires in a few days. I don't think I can fund the Penfed CD directly from the GMAC CD. Is there any type of grace period for funding the Penfed CD?

1
Comment #36 by Banking Guy (anonymous) posted on
Banking Guy
You may want to call Penfed and see if they have any recommendations. They may have a way to quickly fund the CD. If you could join Penfed by Monday, you may be able to wire the money into the Penfed savings account. Then you could open the CD online with funds from your savings account.

1
Comment #37 by Banking Guy (anonymous) posted on
Banking Guy
New lower rates have replaced these 6.25% yields as of February 1, 2007. Please refer to this new post for more info.

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Comment #38 by Anonymous posted on
Anonymous
Elgibility, what if your father was elgible, (but is now deceased) ???

Does belonging to a STATE Air National Guard Count ???

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Comment #39 by Anonymous posted on
Anonymous
An unknown qualifier for membership is that if your parents are eligible to join then you can join even if they are not members. My father is a WW2 vet and I joined even though he didnt. It works with no membership fee. rod

I just sent a message to PenFed. My father was a veteran. He died on active duty.

PenFed said only Parents who were retired from the military are elgible ??? How sucky is that ??????

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Comment #40 by Rammesh (anonymous) posted on
Rammesh
Got a question: Should we have to pay $20 fee every year and continue membership in order to have the 3 year CD? Anyone aware of it?

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Comment #41 by Banking Guy (anonymous) posted on
Banking Guy
You don't have to maintain NMFA membership to continue your PenFed membership. It's just like if you join a credit union based on your employment and you lose that job, you can still maintain your credit union membership. But the NMFA does seem like a good association to continue the membership.

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