Dedicated to Deposits: Deals, Data, and Discussion

New PenFed Certificate Rates Released

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Pentagon Federal Credit Union
Pentagon Federal Credit Union continued its practice of raising certificate rates before the start of the new year. Unfortunately, the new higher rates aren't as good as previous years even when factoring in the new rate environment. The highest yield is 5.25% APY, but this requires a 7-year term. The 5-year term has a yield of 5.00% APY which is just 5 basis points higher than the previous 4.95% APY. The rates for the shorter terms didn't change.

PenFed's money market certificate page had a mistake regarding the 5-year certificate. In the top promotion area of the page, it listed the 5-year yield as 5.25%. However, the rate table listed the 5-year yield of 5.00%. I've confirmed that only the 7-year term has the 5.25% APY.

With the current rate environment, I can understand a 5.25% yield compared to last year's 6.25% yield, but I had thought they would have this yield apply to terms from 3 to 7 years. Last year the 6.25% yield applied to terms from 3 to 7 years. My source did say that they intend to smooth out the certificate demand for 2008. Since 7-years is a very long term for most people, I'm sure they won't see a spike this time. As you can see in my last week's rate summary, you can get better 5-year and 7-year CD rates at other banks and credit unions.

One important note regarding a 7-year term is that the penalty for early withdrawals is much more severe than the early withdrawal penalty for the shorter terms. The 7-year penalty is up to one year of interest. If the certificate is closed before one year, the penalty is all of the interest that has been earned. The 5-year penalty is only up to 180 days of interest.

PenFed Overview

I have more details on PenFed's certificates and on joining PenFed in this September PenFed post.

Other PenFed Deals

As I mentioned last week, PenFed has other good deals. These include low rate auto loans and a cash back credit card which will soon give 2% cash back on groceries in addition to 5% on gas and 1.25% on all other purchases.

PenFed also has very competitive home equity loan rates. The lowest fixed rate is 4.99% APR for terms up to 10 years. As this blog article describes, home equity loans can be useful to consolidate high interest debt such as credit cards. However, this requires a high level of responsibility. Another advantage of HEL's is that thay are tax deductible. This Bankrate article has some useful details regarding tax deductability of home equity loans.
  Tags: Pentagon Federal Credit Union, CD rates

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Comments
6 comments.
Comment #1 by Anonymous posted on
Anonymous
This is soooo disappointing. Now I have to decide whether to hold off and see if (maybe, maybe) they'll raise the rates a little, or whether I invest my money elsewhere.

1
Comment #2 by Anonymous posted on
Anonymous
Same with me. I invested in last years 3 yr CD at 6.25%, but no go this year for a 7 yr period.
Banking Guy, thanks for the info.

1
Comment #3 by grobe (anonymous) posted on
grobe
I think there is a very strong chance that interest rates will increase massively before 7 years is up so I think it is a poor idea to lock in a 5.25% rate for that long.

1
Comment #4 by Anonymous posted on
Anonymous
I too, had been waiting and was disapointed. But with today's economic environment, PenFed can't get too aggressive with their CD interests rates.
Short term I think interests rates will stay relatively low, but surely climb considerably before seven years are up.

1
Comment #5 by Anonymous posted on
Anonymous
Very disappointing! A .05 % over the 4.95% they were offering.

I took advantage of the 6% CD's 3 months ago - guess I should have maxed out my total investment then.

Thanks for tracking this and all the others.

1
Comment #6 by Anonymous posted on
Anonymous
Well, Penfed sure fixed the problem of getting too much money from aggressive promotional rates!

I'm not biting. I'm hoping short-term (6 mo) rates from troubled lenders like Countrywide stay reasonably high until inflation from sustained high oil prices really kicks in.

Some guys like Bill Gross of PIMCO think the Fed will continue to cut rates throughout 2008. I'm sure glad I pigged out on longer-term 6% CD's over the past year.

1