Navy Federal Offers Very Competitive 5-Year CD, 3.50% APY
It’s another good news Monday at Navy Federal Credit Union (Navy Fed). The 5-year Share Certificate rate has been increased to 3.50% APY on all tiers. Minimum deposit is $1k. There is no maximum deposit. This is just a standard type of Certificate. There are no special features. For example, add-on deposits are not allowed until maturity.
| APY | MIN | MAX | INSTITUTION | PRODUCT | DETAILS |
|---|---|---|---|---|---|
| 3.50% | $1k | - | Navy Federal Credit Union | 5 Year Certificate Special | |
| 3.50% | $1k | - | Navy Federal Credit Union | 5 Year IRA Special (Traditional, Roth, CESA, SEP) |
The Share Certificate is also available as an IRA (Traditional, Roth, SEP, ESA), earning the same APY with the same funding requirements.
As stated in Navy Fed’s Combined Certificate Disclosure, the Early Withdrawal Penalty reads as follows:
(c) If the term to maturity is five years or greater, the amount forfeited is equal to the lesser of: (1) all dividends for 365 days on the amount withdrawn, or (2) all dividends on the amount withdrawn since the date of issuance or renewal.
This Early Withdrawal Penalty is harsh, and thus, it’s an important factor to consider.
One thing to remember is that you can always withdraw the accrued interest from a Navy Fed’s CD without any penalty. Navy Fed’s Certificate Brochure reads as follows:
Dividends on Navy Federal certificates are compounded daily and credited monthly. They’re posted to the account on both the last business day in the period in which they are earned and at maturity. Dividends that have been credited are available for withdrawal anytime without penalty.
Funding and Accessing Maturing Funds
One easy way to fund a Navy Fed Share Certificate using the online application is to first deposit funds for the Certificate into your Navy Fed checking, savings or Money Market Savings account. Using another institution’s ACH transfer service may be the quickest way. Once the funds are in the Navy Fed account, you can open the Share Certificate using Navy Fed’s online application. In the application, you can specify that the funds be pulled from that Navy Fed account.
An easy way to receive funds from a matured Navy Fed Share Certificate is to provide instructions to have the funds transferred to any existing Navy Fed checking, savings or Money Market Savings account. There is a 21-day grace period at maturity before the Share Certificate automatically renews.
One important thing to note about Navy Fed is its restrictions on ACH debits from the savings account. The following is an excerpt from Navy Fed’s Electronic Funds Transfer Agreement and Disclosure:
When you originate an ACH transfer at another financial institution, please note that your Navy Federal savings account may only receive ACH credits. Checking accounts may receive ACH credits and debits. MMSAs may receive ACH credits and debits in accordance with the limitations set forth in the MMSA agreement.
So if you plan to pull funds from Navy Fed using the ACH service of another institution, you should consider opening either the Money Market Savings account or one of Navy Fed’s checking accounts.
Beneficiaries and Trust Accounts
Unlimited beneficiaries can be named, with name, address, DOB, and Social Security numbers required for each beneficiary. You also have the option to assign percentages. To designate beneficiaries, refer to Navy Fed’s Payable on Death (POD) and Deposit Trust Accounts Form. This form can also be used to open accounts under a legal trust. Navy Fed calls this a Deposit Trust Account.
How Long Will This Offer Last?
Previously, the 5-year rate ranged from 3.00% APY for a $1k minimum to 3.25% APY for a $100k minimum. This offering was a surprise to me. With so many other banks and credit unions lowering their CD rates at the start of July, I had feared Navy Fed’s 3% rates would be disappearing. That did not happen last week, as the CD rates remained unchanged. Now with this new offering, Navy Fed has become the 5-year rate leader.
I received info about this CD from a Navy Fed official. I asked how long this offer will last. The official said that “as of now, we have no end date in mind.” Considering that Navy Fed’s competitors are offering much lower 5-year rates (for example, PenFed’s 5-year rate is only 2.45% APY), Navy Fed will likely be surprised about the demand, So I wouldn’t count on this offer lasting past July. That’s especially the case if the Fed cuts rates at its meeting on July 30-31.
I tried to learn some insights into why Navy Fed is being so aggressive on its CD rates. The Navy Fed official forwarded my question up their management chain and was able to receive the following quote from Katie Miller, senior vice president of savings products at Navy Federal Credit Union:
"One benefit of membership with Navy Federal is the consistent way in which we reward loyalty. As a credit union, it is our mission to aggressively advocate for our members and set the gold standard with high savings dividends and low loan rates -- all for the sake of improving our members' financial well-being."
This wasn’t the insight that I was hoping for. So I took a look at Navy Fed’s financial data. At the end of the first quarter, Navy Fed reported $75.06 billion in loans and $77.21 billion in deposits. This results in a loan-to-deposit ratio of 97.2%. That’s quite a bit higher than the average for credit unions (82.4%). When an institution has strong loan growth, there’s a need to increase deposits to fund the loans, and that puts upward pressure on their deposit rates. That may be the case with Navy Fed. Also, as I mentioned last month, Navy Fed has been growing fast. Last quarter, they surpassed $100 billion in assets, which is by far the largest credit union in the nation.
Hopefully, Navy Fed will keep up the strong loan growth. That and its large size will hopefully allow it to keep this new 5-year rate for a while.
Availability
Unlike PenFed's nearly universal membership eligibility, Navy Fed’s field of membership is restricted to individuals who have a military connection, regardless of where they reside.
As I described in 2017, Navy Fed expanded their field of membership. The military connection is still required, but many more people are now eligible to join. Now eligible to join are people with family members who at any time were affiliated with the military.
Navy Fed’s "Become a Member" page lists the various ways to qualify for membership.
Active Duty, Retired and Veterans – Service members in all branches of the armed forces are membership-eligible, including:
- Active Duty members of the Army, Marine Corps, Navy, Air Force, Coast Guard, and Ait National Guard.
- Delayed Entry Program (DEP)
- DoD Officer Candidate/ROTC
- DoD Reservists
- Veterans, retirees, and annuitants
Family Members – Individuals with parents, grandparents, spouses, siblings, children (adopted and step), grandchildren, or household members who at any time were affiliated with the military or are already Navy Fed members are also eligible to join.
Department of Defense (DoD) Civilians – Any DoD civilian employee, U.S. government employees/contractors assigned to DoD installations, and DoD retiree/annuitants are welcome to apply.
Joining Navy Fed and/or opening a Share Certificate can be done online or at any of 329 branches located in 30 different states and the District of Columbia.
Credit Union Overview
Navy Federal Credit Union has an overall health grade of "A" at DepositAccounts.com, with a Texas Ratio of 5.38% (excellent) based on March 31, 2019 data. In the past year, Navy Fed has increased its total non-brokered deposits by $10.28 billion, an excellent annual growth rate of 15.38%. Please refer to our financial overview of Navy Federal Credit Union (NCUA Charter # 5536) for more details.
Headquartered in Vienna, Virginia, Navy Federal Credit Union is considered the largest credit union in the world. Founded in 1933 as the Navy Department Employees’ Credit Union of the District of Columbia, Navy Federal has grown from its initial seven members to more than 8,200,000 members and assets in excess of $103 billion.
How the Special Certificate Compares
When compared to 173 similar length-of-term CDs tracked by DepositAccounts.com that are available nationwide, Navy Federal Credit Union’s 5-year Share Certificate APY ranks first.
| Interest Rate | CD Length of Term | Credit Union/Bank |
|---|---|---|
| 3.50% APY | 5-Year Share Certificate ($1k min) | Navy Federal Credit Union |
| 3.30% APY | 5-Year Promotional CD ($10k min) | The Federal Savings Bank |
| 3.30% APY | 5-Year Jumbo Share Certificate ($100k min) | GTE Financial Federal Credit Union |
| 3.20% APY | 5-Year Jumbo Share Certificate ($100k min) | Signature Federal Credit Union |
The above rates are accurate as of 7/8/2019.
To search for the best CD rates, both nationwide and in state specific, please refer to our CD Rates Table page.
Add to that a presidential election next year and the prospect that President Trump may actually be successful with the extremely challenging China trade deal and you can't rule out the potential for an unusually rapid change in rates even in the relatively near-term.
5 years is a long time. It's not impossible that in 3 years or less this could seem like poor rate. Hedge.
:-)
You've stated several times that interest rates are at "lifetime" or historical lows.
Can you explain what you base that view on since during the entire time President Obama was in office US interest rates were lower than they are now.
My one and only car loan was at around 21% and that was not a bad rate at the time.
I'm also not surprised that Navy's loan portfolio has been increasing in size given that they are a DC area credit union. One thing you can always count on is that, no matter the economy and no matter the administration, the federal government will just keep growing.
p.s. This website is fabulous. Most people would never find this Navy deal without it!
Not sure I understand your advice. "If you have less than $100k investable assets you should never consider long duration CD's to begin with and only stay with short duration." Why is that? Please explain further.
In any event, even if someone has more than 100k investable, they may not be willing to tie 100k up for 5 years at this time. The GTEF deal requires that.
I'm not saying it's a bad option, I'm just saying it's not necessarily a good option depending on your situation and your outlook.
FYI, also maturing in mid-August will be the Andrews 6-month 3.25% CDs for those who "bit" as I did. This Navy special may or may not last that long, though.
Not sure I understand your advice. "If you have less than $100k investable assets you should never consider long duration CD's to begin with and only stay with short duration." Why is that? Please explain further. Thanks.
Got it. Thanks.
Navy did a full credit check on me a few months ago. Is that what you call a hard pull? No problem for me. But then I ended up going in a different direction, I decided to keep things short. I'm waiting to see if they come out with a short term special.
Most people here don't care about a few point hit to their credit. I have never not opened a new account over a hard pull. (It makes no difference if my score is 820 or 815 or 803)
6 months ago or something I was concerned about having too many chexsystems inquiries as a number of people were rejected for new accounts for that.
(at other credit unions)
Agreed Chexsystems is, straight up, a plague. This is especially true for Ken's readers. I dearly wish Ken would do an exposé on them. Here is the dilemma:
Chexsystems ostensibly exists to gather data on financial institution customers who are irresponsible. When you bounce checks, fail timely to make loan repayments, or in any way seek to harm or defraud your financial institution you cannot expect to do so in private. Other financial institutions want to know about your shenanigans and Chexsystems is out there to provide them that information. If you're a shady operator or a crook, it is right and proper that you should have nowhere to run and nowhere to hide. Period.
But the overwhelming majority of Ken's readers are NOT crooks. We are just honest people seeking to make the most money we can from our nesteggs. There is nothing whatsoever illegal about that. Nevertheless, Chexsystems can be an execration for us, too. Here is why:
Chexsystems makes available, to all financial institutions, data regarding our legal and honest account openings. These matters, many of us wrongly believe, are private, strictly between ourselves and our financial institutions. But no. Events we anticipate to be private are, in reality, contained within our Chexsystems report. And too many financial institutions will not open a new account for persons who, in their opinion, are opening "too many" accounts.
Problem is, when you are a da.com reader and chase deals, sure you could be opening more accounts than might an average person. So what!! We are not rule breakers and certainly we are not criminals. Chexsystems has no business making known our LEGAL and HONEST banking activity, and neither should they have the right to do so!! Legal, honest banking activity should be private.
Beware of Chexsystems. And for goodness sake, if you do nothing else, contact them and obtain a free copy of your Chexsystems report. It just might contain surprises you would never, ever, anticipate.
I have been meaning to check my chexsystems report and/or score but so far have not. I think I read that its one per year and I held off thinking maybe I would be rejected and get one that did not count toward the one per year but I have not been rejected in recent years. I was once probably 15 years ago.
I do check in fairly often to see what savings rates are doing, at this age I like to keep things short and mostly available. Even if rates decline to 1% i will survive nicely.
Any reason not to open one large CD using the 1k minimum type, since they are all the same interest rate, and you can do partial withdrawals if needed without running into the minimum balance issue (which will close the CD, if gone below)
If long-term CD rates go up a lot over the next few years (inflation kicks in, etc.), say by several percent, then I feel like 1 year EWP is a relatively small price to pay to lock in the higher rate. (Think of what will happen to 5-year bonds on that case. Their value would be much more sensitive to interest rate changes.)
In 2007 we were kind of lucky to lock in 5-year PenFed CDs at 6+%. Nobody knew if that was the top or where rates would go from there, but it sure made me sleep much better in the coming years, not having to worry too much about rates dropping to zero.