Why PenFed's 7-Year CD Is A Hot Deal

PenFed Credit Union is currently offering a 3.49% APY on its 7-year CD (as of 11/11/2010). That's a long time. The early withdrawal penalty is up to 1 year in interest. In this post I described how much the penalty would cost if the CD is closed early, and it's not too bad.

As I mentioned on Monday, there are risks with long-term CDs such as the possibility that the institution may interpret the disclosure as giving it the right to change the penalty on an existing CD.

Allan Roth has received assurance from a PenFed spokesperson that PenFed would not increase the penalty on existing CDs. Allan describes this assurance in his post, The Last Great CD Rate, and he also shows how good of a deal this PenFed CD is compared with today's bonds.