PenFed CD Rate Increases Are Modest
As anticipated and hoped for by many, PenFed Credit Union (PenFed) started December by raising the rates on all its Money Market Certificate (MMC), with the longer-term MMCs gaining the most ground. Unfortunately, the new rates don’t match our collective expectations, with increases of between 9 and 25 bps. Simply put, the new rates aren’t that great. The new MMC APYs are shown below in bold and are effective as of 12/1/2018. The previous APYs are noted inside parentheses.
- 84 mo - 3.50% (3.30%)
- 60 mo - 3.50% (3.30%)
- 48 mo - 3.15% (2.90%)
- 36 mo - 3.05% (2.85%)
- 24 mo - 2.95% (2.80%)
- 18 mo - 2.90% (2.75%)
- 15 mo - 2.85% (2.71%)
- 12 mo - 2.80% (2.71%)
- 6 mo - 2.40% (2.30%)
As many DA readers know, this is the 5-year anniversary of PenFed’s hot CD deals, including the fabled 3.04% APY offered on the 5-year MMC. It was the hottest deal around at the time: the highest rate offered then on a 5-year CD by an internet bank was only 2.11% APY. To put that PenFed deal in perspective, an equivalent offering today would be something like a 4.50% APY 5-year CD. While only available for two months (December 2013 and January 2014), the 3.04% APY 5-year MMC serves as the touchstone when discussing hot deals.
I think many of us believed PenFed would offer something amazingly competitive in December, because there are millions of dollars in 5-year MMCs that will be maturing in the next two months. PenFed may have to come up a really compelling deal to keep those deposits in-house.
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 readers, alan1 and RateRover, for their Forum posts about PenFed’s December rate increases.
Premium Online Savings
PenFed also raised the rate on its Premium Online Savings account to 2.00% APY on balances up to $100k. According to the Savings Account Disclosure, “Amounts over $100,000 do not earn dividends.” Since the Premium Online Savings account was unveiled three months ago, there have been two rate increases, adding a total of 35 bps.
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 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 180 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 third.
| Interest Rate | CD Length of Term | Credit Union/Bank |
|---|---|---|
| 3.60% APY | 60+ Month CD Special | Northpointe Bank |
| 3.51% APY | 5-Year CD | KS StateBank |
| 3.50% APY | 5-Year Money Market Certificate | PenFed Credit Union |
The above rates are accurate as of 12/1/2018.
To searching for the best CD rates, both nationwide and in your state? Please refer to CD Rates Table page.
Here are a few alternatives to the PenFed 5 year Money Market Certificate (that I found on DA )– Founders FCU (4.06%), New Century Bank (4.01%), Bank of Utica (4.0%), New Horizons Credit Union-OH (3.82%), First Guaranty Bank (3.75%), Pelican State Credit Union (3.71%), Impact Credit Union (3.65%), United States Senate FCU (3.63%), Peninsula FCU (3.6%), and Northpointe Bank (3.6%). Some 4 year alternatives are - Northeast Credit Union (3.82%), CoastHills Credit Union (42 months) (3.71%), Pelican State Credit Union (3.61%), Tech Credit Union (50 months) (3.56%), Cross River Bank (3.56%), Bank of Utica (3.5%), Marion Community CU (45 months) (3.5%), and New Century Bank (3.49%). There are even 3 year alternatives that offer similar rates to the PenFed 5 year rate – Pathways Financial Credit Union (40 months) (4.00%), Pelican State CU (3.51%), Cedar Falls Community CU (41 months) (3.45%) and Veridian CU (41 months) (3.45% Bump Up). Others have mentioned brokered CD’s as another alternative. Yes, I know many of these may have some eligibility and geography restrictions, but there are a few nationwide alternatives as well. My point is that you can probably find some very attractive PenFed alternatives on Ken’s site with a little research if you do not want to accept PenFed’s “modest” offers. Those who choose to move their money out of PenFed will help PenFed to become more customer-focused moving forward. Competition is a wonderful thing.
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 will be the case for so many other members, my money will be fleeing PenFed at the earliest opportunity. It will be such a relief to be out of there. My avenue of escape is PurePoint, where I can schedule an ACH withdrawal and earn interest from the very moment I do the scheduling. Problem is, I refuse to do any such withdrawal scheduling until I actually am able to SEE the money in my PenFed savings account. I will not schedule the withdrawal based solely on their promise to move the CD money to savings soon and timely. It is too dangerous to do so. So I, like so many others, will be forced to telephone them or lose a day's interest. That is one hell of a way for PenFed to do business. It stinks out loud!!
It does seem wrong that the premium savings account, mentioned in comment #10, would hold money that was transferred directly from another Penfed account ransom for 5 business days.
Not being proactive for offering competitive cd rates and that stiff EWP penalty was the biggest blackeye they gave me. Now they are beginning to try to act more like a big bank.
Old Sam Walton of Walmart stores once said that people vote with their feet. I suppose that might be happening more with Penfed customers if Penfed does not straighten up their act.
Active checking account with direct deposit ($250 min.)
Money Market Certificate or IRA Certificate
Mortgage
Installment loan
Equity Loan or Equity Line of Credit
Thrifty Credit Service
Personal Line of Credit
Money Market Savings Accounts
How can they compete if they gave savers a 5% 10 year CD when long term CDs were paying about 1/2 that?
So all us rate chasers are looking for other banks giving promotional offers that are usually short lived. We no longer seem to have that one place like Penfed that is always a leader and by a far margin.
It now costs you 2900 points to a a $25 reward bit 2500 as it was
Like the ewp and 5 day hold , plus money not given until next day.... Pen fed is getting a little sneaky in many ways. Not the same bank get were
Got too much cash 5 years ago and. Became too biggie their britches
I also only purchase gas with this card.
The rep said the matured funds would be moved to my regular savings account as instructed shortly after midnight and she could see the transfer scheduled to occur. When I asked about the dividends waiting to be credited she said it would be around ($xxx), which was the last dividend amount credited. I told her that was unlikely since the last dividend had been credited as of mid November, so the correct amount was closer to half $xxx. "Oh you are right", she said.
Nice going PenFed, excessive wait times and CSRs willing to say anything. I have been a member for 9 years but would not recommend the credit union to anyone new, other than for the usefulness of IRA CD withdrawals after age 59 1/2.
It's not looking like penfed will ever have very good rates again.
I will take my chances with CEFs, dividend stocks & ETFs rather than commit that long for less.
I probably need more in the market as it is.
One of the CD's I have is a 7-year traditional IRA that matures in January 2021. Can I take out all but $1000 into to its affiliated PenFed IRA share account and then have my brokerage initiate a trustee to trustee transfer from there to a traditional IRA at that brokerage. Of course, I want to avoid an EWP and any tax consequences.
Thanks.
As to tax consequences, the regular rules re rollovers would apply. That's one tax-free rollover in any 12-month period. https://www.irs.gov/retirement-plans/ira-one-rollover-per-year-rule
The disclosure does not mention any different treatment for partial withdrawals or total transfers.
Has anyone considered reading the disclosure?
Is it easier to sit around and speculate than to read the disclosure? May be easier but unlikely to be as efficient, or productive.
will not be applied if the withdrawal is made:
[snip]
if the owner has reached age 59 1/2 and takes a partial withdrawal.
What information do the authors of those comments possess that leads them to believe that PenFed considers a trustee-to-trustee transfer to be a "withdrawal"?
That's an easy question to answer. They possess no such information.
If anyone possesses information that PenFed considers a trustee-to-trustee transfer to constitute a "withdrawal" for those purposes, please post that information, along with your source(s). Thanks.
Per PenFed's DISCLOSURE, Form 687 (08/16):
1) Automatic Renewal Certificates. If you selected this option, your certificate will automatically renew at maturity. There is no grace period during which penalty-free withdrawals may be received following the maturity of this certificate.
One reason I was able to go ahead and open long term cd's years ago was the benefits Penfed offered (over 59 1/2)
If not for that who would want to lock up money for 7 years?
I bet many of you are in the same boat.
So if they are 1/4 point under I can live with it.
and click on any one of the IRA Accts. In the middle or at the bottom of the page will be "Disclosures" on the left hand side of the page. Directly opposite of that on the right hand side of the same page will be a little scroll down bar just under the word "print". Using that scroll down bar will bring up the information you are looking for.
about Phone Service at PenFed
I'm doing a partial withdrawal from an IRA CD at Penfed
I asked how the current months interest posting would be handled , assuming it would be pro rated, but was told that no, I would lose the interest on the withdrawn amount for the current cycle
I don't recall running into this before (maybe I missed it) OR could this information be wrong?
If its true, then it's something everyone should be aware of.
Didn't really cost me anything to wait an extra few days. If I need to do something again , I'll ask again about this supposed policy.
Disregard anything on this website that may lead you to believe that membership is not nationally available. You can become a member via joining an organization called Connex (no relationship to Connexus Credit Union). I don't know if joining Advancial via Connex is disclosed in the application process -- you may have to contact Advancial for info on that. Their phone number is 800.322.2709.
Not quite enough to make it worthwhile.
and... putaytoe
potential interest loss overhead incurred during transfer between institutions, etc.
So how did you obtain your $28.80 estimate?
Looks like the 6month Certificate offer did not show up on Penfed site this morning . Nothing showed under 1 year certificate
The money is not needed so would it make sense to have the longest investment with the highest rate?