You can now get very close to a 4.00% CD at USAA Bank. It recently increased the rate of its 7-year CDs, and the Super Jumbo now has a 3.96% APY. This requires a $175K deposit. Below is the full list of rates for the different minimum deposits:
APYs of USAA Bank's 7-year CD and IRA CD as of 8/06/2010
- 3.96% min $175,000
- 3.70% min $95,000
- 3.60% min $1,000
Note, after 7-years with a 3.96% APY, $175K will grow to $229.7K which is under the standard FDIC deposit insurance limit. That's one of the very few advantages of a low interest rate.
For more info on USAA Bank and these CDs, please refer to this recent blog post. Note, the early withdrawal penalty of the 7-year CD is 365 days interest on the amount withdrawn. Also note that the USAA Bank's disclosure states that "Any withdrawals before the maturity date require Bank’s consent." I looked into the possibility of a bank refusing an early withdrawal in this post.
PenFed's 7-year CD rate is close to these rates. I reviewed PenFed's long-term CDs and looked at the effect of the early withdrawal penalties in this post. As I described in the PenFed post, you might do better in a long-term CD that's closed early compared to a short-term CD. The best example of this is Ally Bank's 5-year CD which only has a 60-day early withdrawal penalty (see my Ally Bank CD review).
Thanks to the reader who emailed me news of this rate change.