PenFed Cuts CD Rates - Another Sign of Falling Rates

As feared, PenFed Credit Union (PenFed) started February by lowering the rates on most of its Money Market Certificates (MMC). Most of the MMC rates fell by 20 bps, except for the 36-month and 24-month which fell by 15 bps. There was no change in the 6-month rate. The new MMC APYs are shown below in bold and are effective as of 2/1/2019. The previous APYs are noted inside parentheses.

Wednesday’s Fed meeting made it apparent that the rate peak for this cycle may have already passed. Actually, CD rates had already been falling before the meeting. In fact, PenFed made the unusual move to cut its MMC rates in the middle of the month. On January 18th, PenFed reduced the rate of its 5-year and 7-year MMCs by 15 bps.

The new 3.15% APY is disappointing after seeing 3.50% APY in December and early January. Many had been hoping for 4% in December which would have been a nice replacement for the 3.04% APY 5-year MMCs that were offered in late 2013 and early 2014. If you waited too long, you’ll have to settle for only a slight upgrade to the 3.04% if you want to stay with PenFed.

Any MMC can be opened with a minimum $1k deposit, and there are no stated balance caps. All of the above terms, with the exception of the 6-, 15- and 18-months, are available as IRAs (Traditional, Roth, and CESA) but with APYs 10 bps lower.

PenFed’s Early Withdrawal Penalty (EWP) changed in 2016 and any MMCs that are renewed from now on are subject to the following:

Certificates Having a Term Greater Than Six Months.

a) If redeemed within the first year, all dividends will be forfeited.

b) 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 the 12-month term, no matter when a withdrawal occurs, it is loss of all earned interest.

On the other hand, 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 10 bps lower than its standard CDs.

Thanks to DA reader, HighYield, for his Forum post about PenFed’s February rate cuts.

Availability

Headquartered just outside the Beltway in McLean, Virginia, PenFed Credit Union offers membership to almost every U.S. resident. 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 the 47 full-service branches located in California, the District of Columbia (5), Florida, Georgia (6), Hawaii (3), Kentucky, Maryland (3), North Carolina, Nebraska, New Mexico (2), New York (1), Pennsylvania (4), Tennessee, Texas (8), and Virginia (9).

Credit Union Overview

PenFed Credit Union has an overall health grade of "A" at DepositAccounts.com, with a Texas Ratio of 5.35% (excellent), based on September 30, 2018 data. In the past year, PenFed has increased its total deposits by $703 million, an excellent annual growth rate of 3.98%. Please refer to our financial overview of PenFed Credit Union (NCUA Charter # 227) for more details.

Established in 1935, PenFed Credit Union is the third largest credit union in the nation, with more than 1,685,000 members and assets in excess of $24 billion.

How the Money Market Certificate Compares

When compared to 193 similar length-of-term CDs tracked by DepositAccounts.com that are nationally available and require a similar minimum deposit, PenFed Credit Union's 5-year Money Market Certificate APY currently ranks far below the top.

The above rates are accurate as of 2/1/2019.

To searching for the best CD rates, both nationwide and in your state? Please refer to CD Rates Table page.