PenFed Credit Union Ups Long-Term CD Rates

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Deal Summary: Money Market Certificates – 3-year (1.00% APY), 5-year (1.25% APY), and 7-year (1.50% APY), $1k minimum deposit.

Availability: Easy membership requirement

In July, PenFed Credit Union (PenFed), implemented modest rate increases (10 bps) on the majority of its Money Market Certificates (MMC). Last week, PenFed was a bit more aggressive as it raised rates on three of its long-term MMCs. While the 7-year MMC gained 40 bps, the 3-year and 5-year MMCs each added 15 bps. According to PenFed, these new rates are limited-time offers. The minimum opening deposit for any MMC is $1k, with no stated balance cap.

APYMINMAXINSTITUTIONPRODUCTDETAILS
1.50%$1k-PenFed Credit Union7 Year Money Market Certificate
1.25%$1k-PenFed Credit Union5 Year Money Market Certificate
1.00%$1k-PenFed Credit Union3 Year Money Market Certificate
Rates as of October 21, 2021.

All of these MMCs are available as IRA Certificates (Traditional, Roth, SEP, and CESA), but with APYs a uniform 5 bps lower.

APYMINMAXINSTITUTIONPRODUCTDETAILS
1.45%$1k-PenFed Credit Union7 Year IRA (Traditional, Roth, SEP)
1.45%$500-PenFed Credit Union7 Year CESA
1.20%$1k-PenFed Credit Union5 Year IRA (Traditional, Roth, SEP)
1.20%$500-PenFed Credit Union5 Year CESA
0.95%$1k-PenFed Credit Union3 Year IRA (Traditional, Roth, SEP)
0.95%$500-PenFed Credit Union3 Year CESA
Rates as of October 21, 2021.

As stated on the Money Market Certificate page, the Early Withdrawal Penalty (EWP) for terms greater than six months reads as follows:

Within 365 days from the open date of the certificate, the penalty will be the last 365 days of dividends earned.

After 365 days from the open date of the certificate have elapsed, the penalty will be 30% of gross amount of dividends that would have been earned if the certificate had reached maturity.

Obviously, the EWP is harsh. The following is a breakdown of how the 30% EWP affects the MMCs.

  • 3-year MMC would lose approximately 11 months of dividends
  • 5-year MMC would lose approximately 18 months of dividends
  • 7-year MMC would lose approximately 25 months of dividends

On the other hand, PenFed continues to allow penalty-free partial withdrawals of IRA MCCs for members over the age of 59 1/2. The following is an excerpt from the IRA MCC 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 policy could explain why PenFed now keeps its IRA MCC rates five bps lower than its standard MCCs.

PenFed’s CD History

PenFed calls its CDs "Money Market Certificates" (MMC), but they are essentially certificates of deposit (CD) with fixed rates for specific terms. PenFed has a long history of competitive MCC rates. I first posted on their MMCs in 2005 and 2006 when yields were as high as 6.25%. Many DA readers took advantage of the promotional 10-year MMC (5.00% APY) offered by PenFed in late 2010 and early 2011. Other great deals occurred in late 2013 and early 2014 when PenFed offered 5-year and 7-year MCCs earning 3.04% APY. These fabled MMCs serve as the touchstone when discussing hot CD deals.

In recent history, PenFed hasn’t been as prolific with MMC deals. In addition, its early withdrawal penalties became harsh in 2015. It’s nice to see these new MMC rates, but I think it’ll take higher rates for long-term CDs with harsh early withdrawal penalties to be attractive to most readers in today’s rate environment.

Premium Online Savings

PenFed’s Premium Online Savings is the only established savings account in this week’s Liquid Summary with a green arrow. The new 0.50% APY on all balances isn’t a threat to the top savings rate (0.65% APY) offered by Affirm and Bank Onward, but it does solidly sit in the upper third of rates offered on nationally available savings accounts.

APYMINMAXINSTITUTIONPRODUCTDETAILS
0.50%--PenFed Credit UnionPremium Online Savings
Rates as of October 21, 2021.

Availability

Headquartered just outside the Beltway in McLean, Virginia, PenFed Credit Union’s field of membership (FOM) has been open to almost every U.S. citizen or resident alien for many years, with a laundry list of ways to qualify. For those who did not qualify through residency, employment, or military relationship, joining one of two charitable organizations provided a route to PenFed membership.

Qualifying for PenFed membership has become much simpler: according to CRS, the only requirement is depositing $5 in a Savings/Share account.

When I last wrote about PenFed this past July, the online application hadn’t been updated to reflect the new membership eligibility and still listed a variety of membership requirements (residency, employment, organizational affiliation, military relationship, and "none-of the above").

The Membership Application has been streamlined down to three simple steps.

Step1 – Eligibility – Good news! PenFed membership is open to everyone, including you.

Step 2 – Provide Your Info – Enter your name, phone number, email and address to get started.

Step 3 – Open An Account – Open your savings account with just a $5 initial deposit and you’re a PenFed member!

Joining PenFed and/or opening a Money Market Certificate can done online or at any of the 38 full-service branches located in California, the District of Columbia (3), Florida (3), Georgia (2), Hawaii (3), Maryland, North Carolina, Nebraska, New Jersey, New York (4), Pennsylvania (2), Texas (10), Virginia (5), and Wisconsin.

You will need to maintain a $5 Savings/Share Account as part of your PenFed membership.

Credit Union Overview

PenFed Credit Union has an overall health grade of "A+" at DepositAccounts.com, with a Texas Ratio of 3.45% (excellent), based on June 30, 2021 data. In the past year, PenFed has increased its total non-brokered deposits by $1.92 billion, an excellent annual growth rate of 10.30%. Please refer to our financial overview of PenFed Credit Union (NCUA Charter # 227) for more details.

Established in 1935, PenFed Credit Union is currently the fourth largest credit union in the nation, with more than 2,340,000 members and assets in excess of $27.6 billion.

How the Money Market Certificates Compare

When compared to the similar length-of-term CDs tracked by DepositAccounts.com that are nationally available and require a similar minimum deposit, PenFed Credit Union's 7-year Money Market Certificate APY currently ranks first.

Interest RateCD Length of TermCredit Union/Bank
1.50% APY7-Year Money Market Certificate (EWP=at least 365 days or 30% of all interest that might be earned)PenFed Credit Union
1.30% APY84-Month CD (EWP=540 days)First National Bank of America
1.26% APY7-Year Flex CD (EWP=365 days)SRP FCU

When compared to the 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 RateCD Length of TermCredit Union/Bank
1.35% APY59-Month CD (EWP=365 days)Abound Credit Union
1.26% APY5-Year Fixed CD (EWP=600 days)Lafayette Federal Credit Union
1.25% APY5-Year Money Market Certificate (EWP=at least 365 days or 30% of all interest that might be earned)PenFed Credit Union

When compared to the similar length-of-term CDs tracked by DepositAccounts.com that are nationally available and require a similar minimum deposit, PenFed Credit Union's 3-year Money Market Certificate APY currently ranks third.

Interest RateCD Length of TermCredit Union/Bank
1.11% APY36-Month CD (EWP=180 days or $50)Hughes Federal Credit Union
1.01% APY3-Year Fixed CD (EWP=360 days)Lafayette Federal Credit Union
1.00% APY3-Year Money Market Certificate (EWP=at least 365 days or 30% of all interest that might be earned)PenFed Credit Union

The above information and rates are accurate as of 10/13/2021.

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

Related Pages: savings accounts, 5-year CD rates, nationwide deals

Comments
lou
  |     |   Comment #1
No thanks, I will pass.
Ratesaver
  |     |   Comment #2
I agree and to make matters worse I will be going elsewhere at the first chance I get to leave .The penalties are barbaric.
w00d00w
  |     |   Comment #3
is this method for determining EWP an entirely novel idea? i've not seen it before, but admittedly, my view is limited.
MoneyMoves
  |     |   Comment #4
A work around to consider, for any bank or credit union, is rather than open one CD for $100,000 for example, open 10 CDs for $10,000 each. Gives flexibility, if you only need to access a portion of the total, will only have a portion of the EWP. **of course only open CDs with funds that are highly unlikely to be needed before maturity.
Inforay
  |     |   Comment #5
I stopped opening PenFed CDs. Their early withdrawal penalty is so harsh and the interest rate is comparatively so low that it is not worthwhile. I had tried to break a CD early and the penalty was unconscionable so I left the funds and closed it out when it matures.
kcfield
  |     |   Comment #6
The steep early withdrawal penalties combined with Pen Fed's now mercurial and unpredictable interest rates relative to other financial institutions would keep me from investing in their CDs. I would not consider any investment that could cut into principal (if withdrawn early) unless there was a very high interest rate to offset the risk. 1.5 percent for five years is not nearly sufficient. When I want to risk principal I invest in the stock market.
kcfield
  |     |   Comment #7
I need to correct my comment. While the Pen Fed EWPs are indeed too steep, I checked the Pen Fed website and the EWPs do not affect principal.
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