Police and Fire Federal Credit Union (PFFCU) reduced its CD rates in January, but its long-term CD and IRA CD rates continue to be very competitive. The best is its 5-year CD which has a 3.00% APY. Other competitive rates include a 2.50% APY 4-year CD and a 2.00% APY 3-year CD. Minimum deposit is $500. These rates are listed in the credit union’s rates page as of 1/5/2011.
As a comparison to internet banks on 1/5/2011, the best 5-year CD rate is 2.75% APY at Salem Five Direct and the best 3-year CD rate is 2.00% APY at One West Bank. For credit unions with easy membership, the best 5-year CD rate is 2.93% APY at Melrose Credit Union and the best 3-year CD rate is 2.25% APY at Fort Knox FCU.
The early withdrawal penalty is worse than average with up to 360 days of dividends for terms of 30 months to 5 years. The early withdrawal penalties and other CD details are listed in the credit union’s truth in savings disclosure.
How PFFCU Decides on Deposit Rates?
PFFCU has been offering top CD rates for several years now. For the first half of last year, they were one of the few institutions in the nation to offer a 4.00% 5-year CD. How can they offer such high CD rates? PFFCU posted on its website an informative explanation of how it decides on deposit rates (pdf). Here are some excerpts:
What do we do with the money when it is deposited by members?
Our first goal with the deposits we receive is to make loans to members. Our loans to members consist of Mortgages, Home Equity Loans, Auto Loans, and Unsecured Loans (PLOC, Signature, and Visa).
Because our members have more deposits with us than loans, every new dollar deposited in PFFCU is currently added to our investment portfolio. We are very conservative in our investments, choosing only those investments that have a government guarantee. These guaranteed investments are currently only earning between 0.25% and 1.0%.
How were we able to keep deposit rates so high for so long?
We have been able to pay above market rates on deposits because we operate efficiently, invested very well during the economic crisis of 2008 and 2009, and made good lending decisions so that we did not experience the loan losses of many other financial institutions during the recession. Historically, our average Certificate rate has equaled our average yield on investments so that PFFCU passed through all of its income from investments to members in the form of higher Certificate rates.
We made investments in 2008 and 2009 that are earning 4%. As these investments mature in 2010 and 2011, we must re-invest this money in the same safe investments discussed above that are only earning 0.25% to 1.0%. Our deposit rates have to reflect what PFFCU can earn on its investment portfolio so that PFFCU remains financially sound.
Smart investing and lending decisions have helped PFFCU keep the rates high. However, one important thing to note is that deposit rates at PFFCU and for all institutions will likely continue to fall as old investments mature.
To qualify for membership at PFFCU, you have to belong to one of the credit union's member groups. One group on the list is Weavers Way Cooperative Association which is open to anyone. However, PFFCU placed an additional requirement during the summer. Weavers Way members must also be a resident of Pennsylvania. Please refer to the credit union's membership eligibility page for the full details.
Credit Union Overview
Branches are located in Philadelphia and its suburbs.
The credit union has an overall health score at DepositAccounts.com of 4 out of 5 with a Texas Ratio of 2.21% (excellent) based on September 2010 data. It's a large credit union with $3.76 billion in deposits. Please refer to our financial overview of Police and Fire Federal Credit Union for more details. The credit union is federally insured by the NCUA (Charter # 2551).
Searching for the Best CD and IRA CD Rates
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