PenFed CDs Make Small Gains

For the second month in a row, PenFed Credit Union (PenFed) has started the month by raising its Money Market Certificate (MMC) rates. Like October’s rates, the new rates aren’t that great. Of the nine MMCs in the product line, only the 12-month (2.71% APY) has a rate worth highlighting.

I’m hoping that we’ll see some very competitive rates at PenFed in December. This December will be the 5-year anniversary of PenFed’s hot CD deals. In December 2013 and January 2014, PenFed was offering 3.04% APY on its 5-year MMC. At that time, the highest 5-year CD APY at an internet bank was only 2.11%. That PenFed 2013 CD deal would be like a 4.50% APY 5-year CD today. I haven’t heard anything about the chance of a similar hot deal, but PenFed does have a history of offering very competitive rates when they have a lot of MMCs about to mature. I know PenFed has many millions of dollars in 5-year MMCs that will be maturing this December and January, so they may offer something compelling to keep those deposits.

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.

The following table illustrates the flattening yield curve PenFed’s MMCs have experienced in the last six months, as the short-term rates gain on long-term rates.

PenFed’s Early Withdrawal Penalty (EWP) changed in 2016 and now reads as follows:

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, SYC, for posting PenFed's new rates in the Forum.

Premium Online Savings

PenFed introduced its new Premium Online Savings account about two months ago, earning 1.65% APY on balances up to $100k. That rate has been raised to 1.85% APY. The minimum opening deposit is $5. While the 1.85% APY is basically a mediocre rate when compared to online savings accounts, the Premium Online Savings is a convenient place to park maturing CD funds.

The Premium Online Savings page lists a few FAQs, including,

What is the maximum amount I can transfer?

There is an incoming and outgoing transfer limit of $5,000 per day and $50,000 per rolling 30 day period for transfers you initiate at PenFed.

If you would like to deposit more funds into your account please contact your other bank and send us a Wire or initiate a transfer at your other bank.

To withdraw more funds please initiate a transfer at your other bank, or call us to send a Wire.

Can I access my Premium Online Savings Account at an ATM?

Your Premium Online Savings Account is not accessible from an ATM. To access your savings from an ATM open a Regular Savings Account or a Money Market Savings Account.

Availability

Headquartered in Tysons Corner, Virginia, PenFed Credit Union offers membership to almost every 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 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 5.00% (excellent), based on June 30, 2018 data. In the past year, PenFed has increased its total deposits by $319.83 million, an above average annual growth rate of 1.81%. 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 1,662,000 members and assets in excess of $23.6 billion.

How the Money Market Certificate Compares

When compared to 206 similar length-of-term CDs tracked by DepositAccounts.com that are nationally available and require a similar minimum deposit, PenFed Credit Union's 12-month Money Market Certificate APY currently ranks third.

The above rates are accurate as of 11/5/2018.

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