North Carolina Deposit Account Rates and Deals

Pentagon Federal Credit Union (PenFed) is yet another rate leader to make cuts to its CD rates. Economic data of a slowing economy and falling Treasury yields last month had pointed to a deposit rate environment that would become worse. Unfortunately, that did happen as we saw last week when several CD rate leaders including Alliant Credit Union, Melrose Credit Union, Ally Bank and Discover Bank reduced their CD rates. In this new month PenFed joins this group with its own CD rate cuts. Below are the new CD yields for September 2010. I've noted the old yields in parenthesis.

• 3.49% APY 7-year CD (was 3.75%)
• 2.75% APY 5-year CD (was 3.00%)
• 2.50% APY 4-year CD (was 2.78%)
• 2.00% APY 3-year CD (was 2.25%)
• 1.50% APY 2-year CD (was 1.75%)
• 1.26% APY 1-year CD (was 1.31%)

Minimum deposit is $1,000. The rates are also available in an IRA. These yields are listed in PenFed's Money Market Certificates page as of 9/01/2010. Even though PenFed typically maintains CD rates through the month, they no longer guarantee it.

Below is an updated early withdrawal yield table that shows approximate average yields you would receive if you close these CDs early. It allows you to determine if it makes more sense to buy a long-term CD rather than a short-term CD. I also included Ally Bank's 5-year CD which has a 2.74% APY as of 9/01/2010 with only a 60-day early withdrawal penalty.

Approximate Yields After Early Withdrawal Penalties

As you can see from the above table, if you think you're going to leave the CD untouched for at least 3 years, PenFed's 7-year CD is better than its other CD terms. Ally Bank is still the best deal if you think it's likely you'll break the CD before 4 years (either because you'll need the money or if interest rates shoot up). At year 4, PenFed's 7-year CD becomes the best deal. For more details about PenFed CDs, please refer to my PenFed CD review. For more details about Ally Bank's CDs and early withdrawal penalty, please refer to my Ally Bank CD review.

PenFed's Certificate Reservation Program

I logged into my PenFed account, and I checked the status of PenFed's certificate reservation program. I first reported on this program on August 19th. It allows select PenFed members to reserve CDs in January 2011. The best is a 5.00% APY 10-year CD. As I mentioned, I was informed that the program was only open to PenFed members who had CDs maturing in October. However, several readers who were not in the select group have commented in my post that they have been able to reserve these CDs online. I have not been able to find out if there's any chance that PenFed will not honor these reservations.

PenFed had allocated $240 million of funds for this program. As of this morning (9/01/10), there is $186.68 million left according to PenFed's Certificate Reservations page (available when you're logged in). I'm glad to see the funds are lasting. Perhaps most members are not jumping on this deal because they believe these CD terms are too long.

PenFed Membership

PenFed makes it easy for anyone to join and open accounts online. 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.

Branch Locations

Accounts can be opened online, but for those who prefer branches, PenFed has branches in several parts of the country including Washington DC, Maryland, Virginia, New Jersey, New York, Colorado, North Carolina, Hawaii, Puerto Rico, Missouri and Texas.

Financial/NCUA Info

PenFed's ratings for safety and soundness continue to be strong: 4 stars (excellent) at BauerFinancial, 4 stars (sound) at Bankrate.com and an overall health score of 4 out of 5 at DepositAccounts.com (see our financial overview of Pentagon FCU). These ratings are based on March 2010 data except for DepositAccounts.com which is based on June 2010 data. PenFed is one of the largest credit unions in the US with $14.33 billion in assets and $11.62 billion in deposits. It's federally insured by the NCUA (Charter # 227).

Searching for the Best CD Rates

To search for the best nationwide rates and the best rates in your state, please refer to the following tables at DepositAccounts.com:

• Best CD rates
• Best IRA CD rates

Local Government Credit Union is offering several competitive rates for both its short-term and long-term share term certificates. Some of the best include a 3.25% APY 60-month CD, a 2.75% APY 36-month CD and a 1.50% APY 6-month CD. Minimum deposit is $250. These rates are listed in the credit union's deposit rates page as of 8/25/2010. The date above the CD rates table is old, but dates for the other tables are more current so it appears these rates are kept up-to-date.

The credit union also has competitive savings account rates for its IRAs and HSAs. The Individual Retirement Accounts have a 2.53% APY, and the Health Savings Account has a 2.28% APY as of 8/25/2010.

Credit union membership is open to those who are employees, officials or volunteers of North Carolina local government units. Please refer to the credit union's membership page for the full details. The membership may be more open then you might think. There appears to be many volunteer opportunities which may allow a North Carolina resident to be eligible to join the credit union. I've found this Volunteer Programs listing at the Raleigh government page. Before registering for any of these, it would be wise to check with the credit union to ensure the specific volunteer program would meet the credit union's criteria.

One thing unusual about LGFCU is that it shares branches with SECU, the largest credit union based in North Carolina, and one of the largest ones on the nation. This is how LGFCU describes this relationship:

Are LGFCU and SECU the same credit union?

Although some find it confusing when they first go to a branch with a State Employees’ Credit Union sign, the LGFCU and SECU connection is a simple one. Through a contractual agreement, LGFCU pays SECU personnel to provide services to LGFCU members. This is an efficient and convenient way to serve each and every member.

LGFCU has a different field of membership as well as its own board of directors and administrative staff. Some services and many policies and rates are the same for both credit unions; however, there are occasions when these differ. These variations are usually because of the different demographic and financial makeup of the two credit unions.

This gives LGFCU members access to branches throughout North Carolina. I did a 100-mile radius search from Raleigh using LGFCU's branch locator tool, and it showed 100 branches.

LGFCU's ratings for safety and soundness are fair: 3 stars (adequate) at BauerFinancial, 3 stars (performing) at Bankrate.com and an overall health score of 4 out of 5 at DepositAccounts.com (see our financial overview of Local Government Credit Union). The DepositAccounts.com rating is based on June 2010 data. The others are based on March 2010 data. The credit union is federally insured by the NCUA (Charter # 24003).

Searching for the Best CD Rates

To search for the best nationwide CD rates and the best CD rates in your state, please refer to the CD rates section of DepositAccounts.com.

Select Bank & Trust is offering a high-yield reward checking account called Easy Green Checking. It has the following rates and features if certain monthly requirements are met (as of 8/13/2010):

• 4.08% APY on balances up to $25,000
• 0.50% on portion of balance over $25,000
• 0.10% base rate if requirements are not met
• Free nationwide ATM use

Monthly requirements include:

• 10 debit card purchases
• One direct deposit
• Receive e-statements and be registered for online banking

Other features of the account include:

• $100 minimum initial deposit
• No minimum balance requirement
• No monthly service fee
• Free Online Bill Pay

It's nice to see another four-percent-plus reward checking account these days. Unfortunately, it's only a local deal. According to the bank, a branch visit is required to open the account.

Branches are located in the North Carolina cities of Greenville and Elizabeth City.

The bank's ratings for safety and soundness are above average: 5 stars (superior) at BauerFinancial, 3 stars (performing) at Bankrate.com and an overall health score of 4 out of 5 at DepositAccounts.com (see our financial overview for Select Bank & Trust Company). These ratings are based on 3/31/10 financial data. The bank has been a FDIC member since 2004 (FDIC Certificate # 57783).

Other High-Yield Reward Checking Accounts

To find reward checking accounts in your state or to find those available nationwide, please refer to the reward checking section of DepositAccounts.com.

Southern Select Community Credit Union is advertising two competitive CD specials: a 2.02% APY 17-month CD and a 2.27% APY 25-month CD. Minimum deposit is $5,000. These specials were advertised in the 8/8/2010 edition of The News Herald paper. The ad is available online here.

Credit union membership is open to those who live, work, worship or attend school in a 50-mile radius of the credit union's Kannapolis office. Please refer to the credit union's Join Us page for the full details. Membership requires a one-time $5 fee and a minimum balance of $25 in the share savings account.

Kannapolis is located about 20 miles northeast of Charlotte. The credit union also has branches in Concord, North Carolina.

The credit union's ratings for safety and soundness are above average: 4 stars (excellent) at BauerFinancial, 3 stars (performing) at Bankrate.com and an overall health score of 4 out of 5 at DepositAccounts.com (see our financial overview for Charter # 66583).

The Fort Sill National Bank is offering several competitive CD rates. The most competitive one is the 6-month CD with a 1.41% APY. Other ones include a 1.75% APY 18-month CD, a 2.00% APY 30-month CD and a 3.00% APY 60-month CD. Minimum deposit is $500. These rates are listed in the bank's rates page as of 8/04/2010.

It appears that a branch visit is required to open an account. As you might expect by the name, the bank is targeted to military communities, and many of its branches are on military bases. However, the bank also serves civilian communities, and it has many branches outside of bases (many are in Walmart). The states which have several branches outside of military bases include Oklahoma, Tennessee and North Carolina. The other states in which the branches are mostly inside military bases include California, Texas, South Carolina and Delaware.

The bank's ratings for safety and soundness are very strong: 5 stars (superior) at BauerFinancial, 5 stars (superior) at Bankrate.com and an overall health score of 4 out of 5 at DepositAccounts.com (see our FSNB reviews page). These ratings are based on 3/31/10 financial data. The bank has been a FDIC member since 1946 (FDIC Certificate # 16416).

Update: I'm afraid it didn't take long for Randolph Bank to be overwhelmed. A few hours after this post was published, the bank added the following to their reward checking page:

Due to overwhelming volume, we have restricted our Extra-Mile Choice high interest checking account to residents in North Carolina only. At this time, our online account opening link has been suspended.

Randolph Bank & Trust Company has added an online application for its nationwide reward checking account. So you can now sign up online for what is currently the best nationwide reward checking account. As of 8/03/2010, the rate is 4.75% APY for balances up to $25K. I first reported on this account in mid July. At that time the application process required mailing documents.

New Savings Account

Another thing I noticed in the bank's online application is a new savings account called Extra Mile Smart Savings Account. In the online application the rate was 1.29% APY as of 8/03/2010. When I clicked on the account name, a paragraph popped up stating that the initial rate is guaranteed until January 31, 2011. Here's the entire paragraph:

Randolph Bank’s Extra Mile Smart Savings Account is a high yield savings account that is only offered online. Open with $50. No monthly fees, ATM card available, e-statement required. High interest rate earned on all balances; initial rate guaranteed until January 31, 2011. No minimum balance requirements.

Unfortunately, the checking account does not have the same rate guarantee. As you can see in my list of the best five nationwide reward checking accounts, Randolph is way above the others. Please note that this is unlikely to last. Randolph is a small bank with only $236 million in deposits. Based on what has happened at other banks that have offered hot nationwide deals, one or more of the following is likely to occur:

• Reduced availability for new customers (Could change to be limited to to just a few states, its state only (NC) or to just its local market area (Asheboro))
• Accounts of out-of-market customers are closed or changed to a low paying account (This has been rare)
• Reduced rates (Could quickly fall by 100 basis points or more)
• Reduced balance cap ($25K could fall to $15K or $10K)

The latest example of a bank making one of these changes is ViewPoint Bank which just started to limit new applicants to only Texas residents.

You may want to go with a bank that has more history with its reward checking account. I reviewed five of the best nationwide reward checking accounts last month. With ViewPoint removed, the list is now down to four. But there are several other nationwide reward checking account available, but most have rates under 3.50% APY for balances up to $25K. You can see the full list in the reward checking section of DepositAccounts.com. You can also use this to find reward checking accounts in your state.

Thanks to the readers who mentioned this change in the discussion forum.

Pentagon Federal Credit Union came out with its August CD and IRA CD rates. Rates for most terms stayed the same. However, the 7-year CD rate increased from 3.51% APY to 3.75% APY which makes this one of the best nationwide CD rates. The 2-year CD rate also increased, but the new rate of 1.75% APY is still not a top rate. Minimum deposit is $1,000. These rates are listed in the PenFed's Money Market Certificates page as of 8/02/2010. PenFed typically maintains its CD rates through the month, but note that there's no guarantee.

The main downside with this 7-year CD is a hefty early withdrawal penalty. According to the CD application (disclosure on 2nd page), the early withdrawal penalty for the 7-year certificate is:

a) If redeemed within 365 days of the issue date or any renewal date, all dividends will be forfeited;
b) If redeemed thereafter, but prior to the maturity date, dividends for the most recent 365 days will be forfeited.

In short, the penalty is 1-year of interest for an early withdrawal after the first year. You lose all interest for an early withdrawal before the first year. The penalty for the shorter terms is only 180 days of interest.

Special Early Withdrawal Feature for PenFed IRA CDs

PenFed has a nice feature for its IRA CDs. If you have reached the age of 59½, you can avoid an early withdrawal penalty if you only take a partial withdrawal. A partial withdrawal just requires that you leave at least the minimum balance of $1,000 in the IRA CD. So for large IRA CDs, this effectively eliminates the early withdrawal penalty. I described the details of this feature in this PenFed IRA CD review.

Do Long-Term CDs Make Sense?

It might seem unwise to lock into a long-term CD when rates are so low. If rates do go up in the next year or two, you may be able to get much higher rates. So it may seem better to stay in a savings account or short-term CDs until rates improve. The risk is that if rates don't go up, you'll earn much less interest than what you could have earned with the long-term CD. You also have to take into account the early withdrawal penalty. If rates go up substantially, you can break the CD with the early withdrawal penalty and reinvest the money into higher paying accounts. You could make more money in this approach than you could if you kept your money in a savings account or short-term CDs.

Below is a comparison of the approximate annualized yields that would result if you closed PenFed's 7-year CD at year 1, 2 and up to year 6. The yield is approximated by removing one year of interest and then computing the new effective average yield for that time period. The yield at year 2 is easy to compute since you essentially cut the amount of interest that you earn in half. So you just divide 3.75% by 2 which is approximately 1.88% APY. As you can see, this is a pretty competitive yield for 2-year CDs.

For comparison, I included PenFed's 5-year CD and Ally Bank's 5-year CD. PenFed's 5-year CD's early withdrawal penalty is 180 days of interest (only half of the 7-year CD penalty). Ally Bank's 5-year CD has only a 60-day interest penalty. The rates are as of 8/02/2010.

Average Yields After Early Withdrawal Penalties

As you can see in the table above, you will earn more with the 5-year CDs if you take an early withdrawal before 3 years. After 3 years, the 7-year CD starts to outperform the PenFed 5-year CD, and after 4 years, the 7-year CD starts to outperform Ally's 5-year CD. Fore more details about Ally Bank's CDs and early withdrawal penalty, please refer to my Ally Bank CD review.

PenFed Membership

PenFed makes it easy for anyone to join and open accounts online. 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.

Branch Locations

Accounts can be opened online, but for those who prefer branches, PenFed has branches in several parts of the country including Washington DC, Maryland, Virginia, New Jersey, New York, Colorado, North Carolina, Hawaii, Puerto Rico, Missouri and Texas.

Financial/NCUA Info

PenFed's ratings for safety and soundness continue to be strong: 4 stars (excellent) at BauerFinancial, 4 stars (sound) at Bankrate.com and an overall health score of 4 out of 5 at DepositAccounts.com (see our financial overview of Pentagon FCU). PenFed is one of the largest credit unions in the US with $14.2 billion in assets and $11.51 billion in deposits. It's federally insured by the NCUA (Charter # 227).

Randolph Bank & Trust Company is offering a high-yield reward checking account with a yield that is rarely seen these days. It's called the Extra-Mile Choice Checking Account, and it has the following rates and features if certain monthly requirements are met (as of 7/16/2010):

• 4.75% APY on balances up to $25,000
• 1.00% APY on portion of balance over $25,000
• 0.10% base rate if requirements are not met
• Free nationwide ATM withdrawals

Monthly requirements include:

• 12 debit card purchases (minimum $5 each)
• One direct deposit or one Bill Pay or one Auto Draft
• Receive your monthly statement electronically

Other features of the account include:

• Minimum amount to open is $100
• No monthly service charge
• No minimum balance requirement

Note the $5 minimum that's required for each debit card purchase. I almost did not notice this requirement. It's listed in the small print right before the typical warning that ATM transactions don't count.

It appears that the account is only for people who reside in the local market area. I've sent an email to confirm. Update: I received a reply from the bank, and according to the bank's rep, the account is available nationwide. Here's an excerpt of the email:

We do offer this account to residents outside of NC. Online account opening will be available on our website within the next two months; however, we can open an account for you by mailing the documents.

Update 8/3/2010: A couple of days after the bank released its online application, it changed its nationwide policy. From the bank's reward checking page:

Due to overwhelming volume, we have restricted our Extra-Mile Choice high interest checking account to residents in North Carolina only. At this time, our online account opening link has been suspended.

As I had mentioned, small banks often change their policy on account availability.

Branches are located in the North Carolina cities of Asheboro, Burlington, Mebane and Randleman.

The bank's ratings for safety and soundness are fair: 3½ stars (good) at BauerFinancial, 3 stars (performing) at Bankrate.com and an overall health score of 3 out of 5 at DepositAccounts.com (see our financial overview of Randolph Bank and Trust Company). These ratings are based on 3/31/10 data except for Bankrate which is based on 12/31/09 data. The bank has been a FDIC member since 1978 (FDIC Certificate # 22746).

Thanks to the reader who emailed me news of this reward checking account.

Finding the Best Reward Checking Account

Please refer to the reward checking section of DepositAccounts.com to find reward checking accounts in your state or that are available nationwide.

Unlike Randolph Bank, the vast majority of banks and credit unions which offer reward checking accounts don't have a minimum for each debit card purchase. With the passage of the financial reform, banks may not feel it necessary to set minimums since retailers will be allowed to set minimums as high as $10.

Carolina Bank is offering three competitive CD specials. The best is a 3.01% APY 55-month CD. The other ones are a 1.42% APY 10-month CD and a 1.86% APY 21-month CD. Minimum deposit is $10,000. These rates are listed in the bank's deposit rates page as of 7/13/2010.

It appears that a branch visit is required to open an account. Branches are located in the North Carolina cities of Asheboro, Burlington, High Point, Greensboro and Winston-Salem.

The bank's ratings for safety and soundness are a little weak: 3 stars (adequate) at BauerFinancial, 2 stars (below peer group) at Bankrate.com and an overall health score of 3 out of 5 at DepositAccounts.com (see our financial overview of Carolina Bank). These ratings are based on 3/31/10 data except for Bankrate which is based on 12/31/09 data. The bank has been a FDIC member since 1996 (FDIC Certificate # 34348).

Searching for the Best CD Rates

To search for the best nationwide CD rates and the best CD rates in your state, please refer to the CD rates section of DepositAccounts.com.

BB&T continues to offer a $100 cash bonus for opening its free checking account. However, they have made it a little harder to get the full $100. Here are the steps required:

• Open a Free BB&T checking account online by 8/31/2010
• Register online at bbt.com/welcome100
• Get $50 for making 10 online bill payments ($25 minimum payment) within 90 days of account opening
• Get $50 for receiving two direct deposits of at least $50 from the same source within 90 days of account opening

Here's the direct link to the promotions page. It's also mentioned at BB&T's home page.

The old promo in March made it easier to qualify for the $100 bonus. It could be done with only 3 online bill payments. No direct deposit was required.

In my March post, several readers have reported that BB&T makes it difficult to close accounts. If you can't make it into a branch, you may be required to mail in a notarized letter requesting that the account to be closed. One reader commented that he wasn't required to mail a notarized letter, but instead he was required to mail a copy of his ID with the letter.

The free checking account has a minimum opening deposit of $50. There are no minimum balance requirements or monthly fees. Online Bill Payment is free.

I asked the CSR in March about a hard credit inquiry. According to the CSR, "it would be a hard hit if you are primary on the application." The credit check is done through Equifax. They also use ChexSystem in the application process.

I was also told that BB&T accounts can only be opened in states with BB&T branches. That now includes Texas (BB&T took over Colonial Bank and its Texas branches when it failed in August 2009).

It's an online promotion only. However, in the small print it states that it's available at the branches in AL, FL and TX. BB&T branches are located in Florida, Georgia, Alabama, North Carolina, South Carolina, Tennessee, Kentucky, Indiana, Texas, Virginia, West Virginia, Maryland and Washington DC.

BB&T is a member FDIC (FDIC Certificate # 9846).

Other Bank Bonuses

To find other bonus deals, please refer to my bank bonus page which has all of my recent bank bonus posts. Some additional bonus deals are also in the checking account discussion forum.