Dedicated to Deposits: Deals, Data, and Discussion

It's Official: 6.00% 3 to 7 Year CDs at Penfed

POSTED ON BY

Pentagon Federal Credit Union
Update 2/01/07: Please check the credit union's website for the latest rates.
Update 10/13/07: The 3, 4, 5 and 7 year CD rates are now 5% APY.

Pentagon Federal Credit Union (Penfed) officially posted their new Money Market Certificate (CD) rates this morning. The 3, 4, 5 and 7 year CD yields are all 6.00% APY (5.83% interest rate). The rate table states that these rates will be in effect through October 31, 2007. However, I was told by my contact that these rates will only be available for a limited time (and that wasn't just a typical marketing call to action). So I assume if there is strong demand, these rates may end before the 31st.

I did an extensive review of Penfed in my January Penfed post when they were offering 6.25% CDs. I'll summarize that post here.

Eligibility to Join Penfed

If you don't qualify based on military, employer or family, you can become eligible by joining the National Military Family Association (NMFA). Please refer to How to Join overview page for details. Joining NMFA and Penfed can be done at the same time all online. The yearly membership for NMFA is $20, but your membership in the association does not need to be maintained to continue as a Penfed member (although the NMFA is a good association to support).

Summary of My Experience Joining Penfed

I joined last year, so there may have been some changes. Here's a quick summary of my experience:
  • Start at their Penfed's Joining Made Easy page
  • 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.
  • I was only able to fund the NMFA membership and a Penfed savings account with a credit card. The total was $25 ($5 for the initial savings account deposit and $20 for NMFA membership). Penfed warned that funding the savings account with a credit card would be considered a cash advance, but my Citi credit card didn't charge me.
  • 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.
  • Hard Credit Inquiry - A hard credit pull is done when you open your share savings account (when you join). I was told that no additional hard pulls are done for opening CDs. They will also do a hard pull for checking accounts, loans and credit cards. When I checked my credit report at Equifax, there was just one hard pull done by Penfed when I first joined. It did not show any hard pulls for the two CDs that I purchased so this seems to confirm what I was told by the CSR. One reader mentioned the following:
    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.
    Another reader mentioned this:
    They do a hard pull for opening an account, but they use the same pull for 60 days. So if you bite the bullet and take the hard for opening a share account, they will use that same hard (ie not initiate a 2nd hard pull) for a credit card app. So anyone planning to apply for membership via a share account should seriously consider applying for the 1.25% credit card at the same time.
    Note, the hard pull may lower your FICO score by about 5 points. The effect should be removed in about 6 months.

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 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.
  • 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.

Safety of Penfed?

Bankrate.com rates them as 3 out of 5 stars (performing) based on 6/30/07 financial data. This is the same rating they had when I reported on Penfed in January. BauerFinancial rates them as 5 out of 5 stars (superior) based on 6/30/07 financial data. As you can see from their NCUA page, it's a major credit union with $10.4 billion in assets.

Is 3 or More Years Too Long?

If you think inflation will soon drive the Fed to go back to rate hikes, you may be hesitant on a long term CD. No one can predict future interest rates. History can give some idea of possible scenarios. From the Fed funds rate history, it appears once the Fed starts to lower rates, it's usually 2 or more years before they start hiking rates. Although there have been exceptions. Also, long term rates can be driven by other issues. Here's a link to historical rate data.

How Much Can Be Insured Under the NCUA?

In addition to the typical $100K per regular account and $250K per IRA, you can extend your non-retirement coverage over $100K with joint accounts and with payable-on-death (POD) accounts. With POD accounts you must make sure the beneficiaries are qualified. I have more details along with examples in my extending FDIC and NCUA coverage post. Insurance coverage can be determined using the NCUA Share Insurance Estimator.

I have more info on funding a Penfed CD in this January Penfed post. Some more miscellaneous info is available in this December Penfed post. Note, the special IRA provisions that I mentioned have changed. Please refer to this post for more details.

Edit 9:30am - Added hard inquiry info from previous post along with more links to previous posts.

Related Pages: Pentagon Federal Credit Union, CD rates, IRA rates

Related Posts

Comments
29 Comments.
Comment #1 by Anonymous posted on
Anonymous
If you open up multiple 10 thousand dollar cd's, is there a hard pull on each one?

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Comment #2 by Anonymous posted on
Anonymous
Re hard pulls: when I opened severalCDs last year, there was only one hard pull (Equifax). I suspect that PenFed, like many other CUs, does a hard pull when you apply for membership but not for the individual products. So if you are just joining and want one of their credit cards, ask for it right away.

Update for this year: although the ACH transfer page shows a $5,000 daily limit, you can use "direct funding" of your CDs by calling and having the CSR open them for you (this may work online also). At the moment, at least, you can open a CD for more than $10,000.

1
Comment #3 by mk (anonymous) posted on
mk
Just opened two CDs fr 50k each for 3 years. I moved funds from my FNBO account.

Has anyone had any trouble moving funds out of FNBO?

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Comment #4 by Banking Guy (anonymous) posted on
Banking Guy
About the hard credit pulls, I've updated the post with info from a previous post. There doesn't seem to be an easy answer to this.

I've also added some links at the bottom of the post with more info on funding a Penfed CD.

About funding a CD from FNBO. I recently did this from another bank. The amount was debited from my FNBO Direct account without problems. So I would assume you could fund a Penfed CD this way without problems. There may be complications for large withdrawals. Also, don't forget that each withdrawal counts toward the 6-per-month limit.

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Comment #5 by scott (anonymous) posted on
scott
I joined this morning with the $20 for NMFA and $5 for the share account. Just updated my report and see no pull. Only thing I noticed different than your info was I had to call and get pin# to go online. Even with that, from the time I started application till the time I logged into my new account was less than 15 minutes. I plan on doing $100k for 3 years. When I do CDs of longer than a year I take the interest check monthly, Getting that check for almost $500 every month makes it not seem like you are locked as long

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Comment #6 by mk (anonymous) posted on
mk
The CSR told me that I could elect accumulation of interest or get monthly interest checks (funds to checking/saving). What I can also do is that if I select accumulation now, I could switch to monthly interest later, but it will apply from the date I request a switch to monthly distribution.

So, if my 100k goes up to 106K after a year and switch to monthly interest after a year, I'll get monthly checks for interest on 106K for the next two years and 106K on maturity.

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Comment #7 by Mario (anonymous) posted on
Mario
banking guy, here's a link for you that shows fed funds data in a nice graphical manner:

http://research.stlouisfed.org/fred2/categories/118

The most interesting ones are DFEDTAR, the daily fed funds target rate going back to 1982, and DFF, the daily effective rate, going back to 1954.

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Comment #8 by Anonymous posted on
Anonymous
Question: If I have a joint account with POD (3 kids), how much can be insured by NCUA?

1
Comment #9 by djc314 (anonymous) posted on
djc314
I am trying to open this account now for the 3 year cd and every thing has gone well but it will only let me invest $25K. Do I have to open or can I open multiple cd's?

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Comment #10 by Cyclone (anonymous) posted on
Cyclone
How much insurance do I get for doing XYZ?

http://www2.fdic.gov/edie/


NCUA mirrors FDIC, so the results are the same.

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Comment #11 by Anonymous posted on
Anonymous
you sole ownership 100k
you pay on death wife 100k
you pod kid 1 100k
you pod kid 2 100k
you+wife pod kid 1 100k
you+wife pod kid 2 100k

Is this even close to being Correct ? thanks...

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Comment #12 by djc314 (anonymous) posted on
djc314
If you are doing electronic transfer from another bank to open cd you are limited to $25K. You can open several other cd's or call 800-247-5626 and open up over the phone at the amount you want over that limit. Very friendly on phone and they feel this is a very limited offer that may be pulled very soon...

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Comment #13 by Anonymous posted on
Anonymous
the rates will be in effect until oct 31st. unlike justice federal credit union back in march that didnt have a end date, and therefor could be ended at anytime, penfed goes by there rate time table. because who would want to stay with them if they pulled the offer before the 31st. when there rates are low they keep them the same until the end date, so why not when rates are high. it wouldent be honest. do you get my point. KEEP BUYING!!!!!!!!

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Comment #14 by Anonymous posted on
Anonymous
Well it better be. I mailed my check in today and probally wont get there till monday. If they would end it before my check is posted and I got a lower rate I would pull my money back out. Although I dont see how they could that if my application is dated sept 27 the day the promo started.

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Comment #15 by Anonymous posted on
Anonymous
"you sole ownership 100k
you pay on death wife 100k
you pod kid 1 100k
you pod kid 2 100k
you+wife pod kid 1 100k
you+wife pod kid 2 100k

Is this even close to being Correct ? thanks..."

No, not correct.

The first two are correct.
The ones listing the kids as beneficiaries are not correct.

The you-pod-kid1 account plus half the balance in the you+wife-pod-kid1 account would be added together and insured up to $100k.

Similarly, the you-pod-kid2 account plus half the balance in the you+wife-pod-kid2 account would be added together and insured for $100k.

The other half of the balance in the you+wife-pod-kid1 would be insured up to $100k and the other half of the balance in the you+wife-pod-kid2 would be insured up to $100k.

The secret to figuring out insurance on joint POD accounts is to divide the account balane by two (if there are two owners) and treat the two halves as two separate POD accounts naming the same beneficiaries as the original owner.

So the insurance on the you+wife-pod-kid1 account is treated as if half of the money in the account was in a you-pod-kid1 account and half the money was in a wife-pod-kid2 account. The first half conflicts with the you-pod-kid1 account that you already have.

1
Comment #16 by Anonymous posted on
Anonymous
"The secret to figuring out insurance on joint POD accounts is to divide the account balane by two (if there are two owners) and treat the two halves as two separate POD accounts naming the same beneficiaries as the original owner."

That should have been:

The secret to figuring out insurance on joint POD accounts is to divide the account balance by two (if there are two owners) and treat the two halves as two separate POD accounts naming the same beneficiaries as the original account.

1
Comment #17 by scott (anonymous) posted on
scott
Just found out something interesting. I noticed on the CD application that you could set up either joint or in that same box list a beneficiary. Got me thinking maybe I could do joint with my minor daughter. I can't do joint accounts with my wife so it makes it hard to get extra coverage. So I sent them a message asking and below is their response. So looks like $200k insured will be easy. Not many banks allow minors to be joint owners.



Thank you for contacting Pentagon Federal Credit Union.

Your minor daughter can be the joint owner of the certificate. Just put her name
and personal information on the application. When the certificate agreement
arrives, you will sign it for her using this format:

Child's name, by Your name, relationship to child

If you need further assistance, please contact us.

Sincerely,

Vickie King
Pentagon Federal Credit Union

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Comment #18 by Anonymous posted on
Anonymous
Thanks guys for all the info.
Now how do i transfer my 100k into penfed,my world s&l cannot do ACH`s but can do a wire transfer for 20 bucks, but is the routing # the same?I feel better doing a wire then a mail with endorsement.
Thanks again...

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Comment #19 by Anonymous posted on
Anonymous
Anon said
"Now how do i transfer my 100k into penfed,my world s&l cannot do ACH`s but can do a wire transfer for 20 bucks,..."

Have Penfed ACH it FROM from world,

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Comment #20 by Anonymous posted on
Anonymous
Thanks i tried but penfed could only xfer a small amount being i`m a new customer,so went with the wire xfer.Also told by penfed i must bring the funds into my new share account first then set up the cd,this is because of the large amount .

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Comment #21 by scott (anonymous) posted on
scott
I just opened with Penfed the other day so had the same problem with low limits. So I did 4 $25k CDs. Only took about 15 minutes as doing it while logged in pre-fills most of the info

1
Comment #22 by Anonymous posted on
Anonymous
thanks scott, when i click open the account on the penfed site i get a pdf form to fill out.when i click on the very bottom of the page to open a account nothing happens,logged in or not.i believe i`ll just phone them up once my money gets wired in.went into world s&l sat csr said they would wire it first thing monday morn.

1
Comment #23 by Barbara (anonymous) posted on
Barbara
I called Penfed the morning of Sep 28 to open an account. I paid the $20 fee to join plus $5 to open the account. By afternoon, I got cold feet about tying my money up for three years and canceled the deal. They told me I would have to dispute the $20 fee with my credit card company. Because it was a cash advance, my credit card charged me a $10 transaction fee. What a hassle. Penfed did send my $5 back by mail and I am now in the dispute process. All this and a hard credit pull. My fault. Sigh.

1
Comment #24 by NIRAV (anonymous) posted on
NIRAV
test

1
Comment #25 by NIRAV (anonymous) posted on
NIRAV
What about ownership in a revocable trust-with 3 trustees me,wife,father - and one beneficiary-kid.(Within the trust I would like to be sole owner.by a marital agreement listing the CD as solely owned)
How much will it be insured 300k ?

1
Comment #26 by Anonymous posted on
Anonymous
Don't be too sure about this cd being offered until the published end date. I lost out on a cd at a very good bank when they closed the offer early do to market conditions and unexpected response.

1
Comment #27 by Anonymous posted on
Anonymous
doesnt matter now got my $50K 3YR CD so im set YEA HA!!!!!!!!!!!!!!!

1
Comment #28 by Steven from CA (anonymous) posted on
Steven from CA
...CSR said they were told that once they'd hit a certain level of new deposits, the 6.00% rate would be pulled. As a new member I was allowed to open 15 accounts online (as much as $25,000 per account) funding by ACH transfers from other banks, the accounts were listed on PenFed's site immediately. CSR was surprised - they thought new members were only allowed $25,000 per day.

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Comment #29 by Banking Guy (anonymous) posted on
Banking Guy
Thanks for the info. I have a feeling they'll be reaching their deposit target pretty soon. Looks like there's no limit to the number of $25K CDs that you can open in one day. Scott in a few comments above also mentioned doing multiple $25k CDs at one time.

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