PenFed Increases Rates On All Certificates
Deal Summary: Most competitive are the 18-month (1.76% APY) and 1-year (1.61%); $1k minimum deposit
PenFed Credit Union (PenFed) increased the rates on all of its Money Market Certificates (CDs) today. PenFed typically changes rates at the start of each month, so this increase is a good sign that PenFed saw the need to do another rate hike so soon after its October 1st increase. The new rates aren’t exceptional, but they are competitive. The most competitive ones are the 18-month CD (1.76% APY) and the 12-month CD (1.61% APY). The long-term rates also went up, but they’re still not real competitive when compared to internet banks.
Below is a summary of the new CD rates and how they have changed.
- 1.00% APY 6-month (was 0.85%)
- 1.61% APY 1-year (was 1.46%)
- 1.61% APY 15-month (was 1.46%)
- 1.76% APY 18-month (was 1.51%)
- 1.82% APY 2-year (was 1.66%)
- 1.92% APY 3-year (was 1.76%)
- 2.02% APY 4-year (was 1.87%)
- 2.27% APY 5-year (was 2.12%)
- 2.27% APY 7-year (was 2.22%)
The minimum opening deposit is $1k, with no stated balance cap. PenFed calls these Money Market Certificates, but they are essentially CDs. All of the above terms except for the 6-, 15- and 18-months are available as IRAs (Traditional, Roth, and CESA) but with rates that are 5 bps lower.
Please refer to our PenFed's CD rates table for the full listing of CD and IRA CD rates.
Last year, PenFed’s Early Withdrawal Penalty (EWP) changed and now reads as follows:
Certificates Having a Term Greater Than Six Months:
If redeemed within the first year, all dividends will be forfeited.
If redeemed thereafter, but prior to the maturity date, the early withdrawal penalty will equal 30% of what would have been earned if the certificate had been held to maturity, not to exceed total dividends earned.
As you can see, the EWP is harsh. For a 5-year term, 30% of total dividends is 18 months’ interest.
On the positive side, PenFed continues to allow penalty-free partial withdrawals of IRA CDs for members over the age of 59 1/2. The following is an excerpt from the IRA CD disclosure:
Partial withdrawals for members over the age 59 1/2 (including Required Minimum Distributions) and qualified distributions regardless of age (including Disability) may be processed from IRA certificates without incurring an early redemption penalty.
This may be one reason PenFed now keeps its IRA CD rates 5 bps lower than its standard CDs.
Another Winter CD Deal?
I’m hoping we’ll see a repeat of 2013 when PenFed came out with 3% 5-year CDs in December. I have no word of PenFed’s plans, but today’s rate increases are a step in the right direction. To give you an idea how competitive PenFed’s 2013 CD deal was, the top 5-year CD rate from an internet bank in December 2013 was 2.11% APY at EverBank. That was 93 bps under the 3.04% APY that PenFed was offering on its 5- and 7-year CDs.
Availability
Headquartered in Alexandria, Virginia, Pentagon Federal Credit Union offers membership to virtually all U.S. residents. PenFed’s online application lists the various ways in which individuals can qualify for membership.
If you meet any of the following requirements, you are eligible to join PenFed:
1. I am active/retired United States Military & Uniformed Services.
2. I am an employee of a qualifying organization.
3. I belong to the following association or organization.
4. I am an employee of the United State government.
5. I am a relative or housemate of someone who is eligible.
6. I live or work at an eligible location.
7. Other
Selecting Option #7, "Other," provides information about joining PenFed through membership in either Voices for America’s Troops ($17, one-time only dues) or the National Military Family Association ($17, one-time only dues). Joining either of these associations and PenFed can be done simultaneously using PenFed’s online application.
Need another way to join? No problem!
Members of the National Military Family Association and Voices for America's Troops
are among those eligible for PenFed membership. We've made it easy for you to join
one of these associations, which makes you eligible to join PenFed.
Joining PenFed and/or opening a Money Market Certificate can also be done in person at any of branches located in the District of Columbia (6), Florida, Georgia (6), Hawaii (3), Maryland (4), North Carolina, Nebraska, New York (2), Tennessee, Texas (8), Virginia (9), and Puerto Rico (1).
Credit Union Overview
PenFed Credit Union (NCUA Charter # 227) has an overall health grade of "A" at DepositAccounts.com, with a Texas ratio of 3.57% (excellent), based on June 30, 2017 data. In the past year, PenFed has increased its total deposits by $1.73 billion, an excellent annual growth rate of 10.85%. Please refer to our financial overview of PenFed Credit Union for more details.
Established in 1935, PenFed Credit Union is one of the largest credit unions in the nation, with assets in excess of $22 billion.
How the Money Market Certificates Compare
When compared to the 215 similar length-of-term CDs tracked by DepositAccounts.com that require a similar minimum deposit and are nationally available, there are 10 banks and credit unions that offer higher rates than PenFed’s 1-year CD. Below is a sample of these:
| Interest Rate | CD Length of Term | Credit Union/Bank |
|---|---|---|
| 1.75% APY | 14-Month CD ($200 min) | INOVA Federal Credit Union |
| 1.70% APY | 12-Month CD ($1k min) | ableBanking |
| 1.70% APY | 12-Month CD ($500 min) | KS StateBank |
| 1.61% APY | 12-Month Money Market Certificate | PenFed Credit Union |
When compared to the 153 similar length-of-term CDs tracked by DepositAccounts.com that require a similar minimum deposit and are nationally available, there are 3 credit unions that offer higher rates than PenFed’s 18-month CD. These are shown below:
| Interest Rate | CD Length of Term | Credit Union/Bank |
|---|---|---|
| 2.07% APY | 18-month Promotional Share Certificate ($500 min) | GTE Financial Credit Union |
| 1.81% APY | 15-month Special CD ($1k min) | Veridian Credit Union |
| 1.78% APY | 20-month CD ($1k min) | EBSB Direct |
| 1.76% APY | 18-month Money Market Certificate | PenFed Credit Union |
The above rates are accurate as of 10/18/2017.
To search for the best CD rates, both nationwide and state specific, please refer to the CD rates section of DepositAccounts.com or our Rates Map page.
I suspect if one were to hazard a guess, this little wrinkle in PenFed's IRA CD terms and conditions would elicit a huge yawn. The amount of folks aware of the perquisite, divided by those who take advantage of it, might be an integer lower than 10. If you get my drift. Stated another way, it's not a huge issue.
Funny (but true) joke. StateFarmBank has a similar proviso. Some years back, I asked our local State Farm agent why her company did not market the perquisite in retirement communities, such as Rossmoor. Deer in the headlights, she had no idea what I was talking about.
It's a deep, dark, secret. Perhaps we should keep it thus.
It's complicated. While many financial institutions will allow penalty-free withdrawals from IRA CDs for a RMD, the institution might limit the penalty-free withdrawal to your RMD percentage times your account therein.
Thank you.. NEXT....
EWPs on the GTE promotional CDs are described in the fine print at the bottom of https://www.gtefinancial.org/for-members/current-offers/share-certificate-special
I still have this 5 year CD and a 3% account that matures next year. As per Ken's post one of their last 3% 5 year rates was 2013. I wonder how many people are going to close these CDs and move their funds to another institution next year?
I will.
I don't consider EWPs a negative when determining where to invest in my CDs. I just search for the highest rate available to me at the time. Then I'm done with that one and move on the next CD when it matures.
Upping the irony, their e-mail back to me suggested their rates were "competitive". I noted I could make more on a totally-liquid savings account at Alliant than I could on USAA's seven-year CD. Silence.
(1) If you have an IRA, consider NavyFed as well, for NavyFed is one of the few institutions that allow you to ADD to an existing IRA CD every year up to your maximum amount (so if you don't have to open a new IRA CD every year). Note this applies ONLY to IRA CDs.
(2) EWPs are more important than you think. At the time Andrews came out with their 3% CD, I had Navy's 2.5%/2.5 year CD. I was thinking of closing it out and moving everything over to Andrews, but even with Navy's gentle 6mo EWP, I did the math; I would have lost a lot in the move, even with just the gentle 6mo EWP, and while it could have gone either way, I decided to keep it where it was. Imagine if that had been a PenFed CD with a 30% penalty. At any rate, I now no longer even bother looking at PenFed's rates or considering them with that EWP.
Looks like Penfed won't be a CD rate leader in the future so people will look at sites like this and find better rates elsewhere. Some oldtimers with IRAs may want to stay so they can take their RMDs. I'm with them till 2020 when my 10 year 5% CD matures. I also was grandfathered into a 5% gas rebate card so maybe I will stay with them.
Also, I'm sure many of the former members of Valor are rate chasers and took advantage of 3% add on CD.. They will leave Penfed if they don't offer high rates. Let's see what plays out in 2018.