PenFed Credit Union Begins June With New CD Rates
PenFed Credit Union (PenFed) announced new rates on its Money Market Certificate (MMC) but they are not exceptional. (Don’t be confused by the “Money Market Certificate” moniker – they’re essentially CDs.) While the 5- and 7-year MMCs have broken the 3.00% APY ceiling, none of the new APYs are rate leaders, as internet banks (and a few credit unions) continue to be the front-runners in the CD rates race.
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 compares PenFed’s MMC APYs from February 2018 through today. For the most part, the rates seem to have increased proportionally.
PenFed’s Early Withdrawal Penalty (EWP) changed in 2016 and now reads as follows:
1) Six-month Money Market Certificates.
a) If redeemed within 90 days of the issue date or any renewal date, all dividends will be forfeited.
b) If redeemed thereafter, but prior to the maturity date, dividends for 90 days will be forfeited.
2) 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 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 10 bps lower than its standard CDs.
Availability
Headquartered in Tysons Corner, Virginia, PenFed 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 the 49 full-service branches located in California, the District of Columbia (5), Florida, Georgia (6), Hawaii (3), Kentucky, Maryland (4), North Carolina, Nebraska, New Mexico (2), New York (2), 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 4.81% (excellent), based on December 31, 2017 data. In the past year, PenFed has increased its total deposits by $1.15 billion, an excellent annual growth rate of 6.92%. 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 1,650,000 members and assets in excess of $22.8 billion.
How the Money Market Certificates Compare
When compared to the 217 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 seventh.
When compared to the 190 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 sixth.
The above rates are accurate as of 6/1/2018.
To searching for the best CD rates, both nationwide and in your state? Please refer to CD Rates Table page.
You can get 2.05% at Northpoint with a 1 year guarantee.
Maybe I would not hate them so much if I lived near a branch. But I don't.
There is no rational reason why I can't ACH my money out in large increments. And whats funny is not long ago, they had an annual meeting of members. I wasn't going of course but they have a lot of GALL to charge you to attend,
I think that was my first wire and hopefully my last. I think I have a smaller one maturing next month and I may just try the $5000 a day for 5-6 days. I am going to try to write management though. Because its just not right.
But, they are too busy charging $10 a head for members to attend their annual meeting. I hope that included a very nice meal or something. Otherwise, who would go?
https://www.penfed.org/content/dam/penfed/general/pdf/member-notices/AnnualMeetingInvite_2018
Please let me know as I have another maturing on 7/30 at penfed. Sorry I did not see your message until now.
1) Gone from being a CD rate leader, where one could usually expect good rates in January, to being an also-ran,
2) Significantly increased punitive EWPs, and
3) This doesn't involve CDs, but a few years ago PenFed made a move to cut the dollar value of a "point", for all their credit cards that accumulate point rewards. 1 point used to equal 1 cent, now it is less (perhaps 80% of that?). This annoyed many, many customers. I now regularly use only one PenFed card (that one was grandfathered in, and you can't get it anymore). It gives 5% cash-back, not points, for gasoline only.
So in summary - can PenFed really be trusted to continue to honor the "no EWP on partial withdrawals if one is over 59 1/2" clause? For those concerned that EWP terms written in disclosure statements can be retroactively changed - can't this clause as well?
Sorry for the late response. I missed one above too.
only the way some got it
I'm not a huge fan of 5-year CD ladders these days, but that doesn't mean that folks who are fans of same are dummies.
That said, it's not for everyone. The analogy from the stock market is probably that some people like active trading and some like an investment plan with a fixed asset allocation and periodic rebalancing. It doesn't mean the people following a rigid investment plan are financially less literate. In fact, market timers on average have lower returns.
What a waste of time.
EWP is a put option, it has nothing to do with duration.
Let's put the definition of "duration" aside for a moment, I think we can probably agree that CDs (just like marketable bonds) have interest rate risk. If interest rates rise after a CD rate is locked in, then this is a missed opportunity to earn a higher rate. And the longer the CD term, the higher the missed opportunity. In a marketable bond (or a brokered CD), this would be reflected in the lower value.
Actually in my comment #30, I misused the term 'duration.' Duration (if any) is not an advantage of long-term CDs. Higher interest rates due to longer maturity is the advantage. The reason that the interest rate will be higher is due to the term structure of interest rates (i.e., longer maturities take on more interest rate risk, therefore are compensated with a higher term premium).
Every FI statement lists the value as $1,000. So, I am either right, or they are all committing bank fraud.
Check the prices on secondary CDs. They ALL sell for $1,000 because the value DOES NOT CHANGE. Can't be any clearer.
"They ALL sell for $1,000 because the value DOES NOT CHANGE." (caps in original)
No -- they do not all sell for $1000 -- they are sold in units of $1000 par value. I just checked Vanguard's secondary listings. There's a Morgan Stanley CD, maturing May 31, 2023 (that's a duration of just under 5 years), with a coupon of 3.250. The price is 99.300 (pre-commission). The yield to maturity is 3.404 (pre-cmmisssion).
The price of a $1000 CD will be $993.00, not including any fees or commissions. And the price and value will fluctuate over the years. As you write: "Can't be any clearer."
comment?
I think it is about time for one of your usual riddles. Maybe duration would be a good topic.
"Duration is inscrutable, of that we can be sure;
Your interest rate inflexible, for CDs that is pure,
Certainty is relative, just like alternative facts,
But CDs, like so many things, are merely obvious facts."
Burma Shave
Are they the same individual(s)? Has anyone ever seen them together in person, or in the same photograph? Or has one organism simply morphed into the other, kind of like the old Andromeda Strain movie?
Enquiring minds want to know!
I hope Penfed will have competitive rates by then, otherwise I will be moving my $ elsewhere.
"Whether much or a little, think not your fund a spittle;
We started with a tad, then grew with oh so glad.
Smallish funds grow to fortunes, think merely of Buffett,
Others are quite so sad."
And PenFed is an easy target.
Unless you are old, with an IRA and quite bold,
You can basically, well, forget about it.
Burma Shave