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6.01% 48-Month CD at a CU Open to All


USA Federal Credit Union is offering a special 6.01% APY 48-month CD with a $1K minimum deposit. Here are details of this certificate of deposit special:

* 6.01% APY
* 48-month term
* $1,000 minimum, no maximum limit
* can be opened my mail or by phone
* early withdrawal penalty = 90 days of interest
* limited time offer - unknown end date
* no hard credit inquiry for opening accounts
* $10 membership fee in an association for CU eligibility
* $5 CU membership fee and $5 minimum savings deposit required

The field of membership allows eligibility for those who are members of the Prime Meridian Association. People can join this association with a $10 membership fee. An application can be requested from the credit union and can be included with the credit union application. Membership into the credit union requires a $5 membership fee and a minimum opening savings deposit of $5.

Branches are located in San Diego and Riverside County, California and in Las Vegas, Nevada. It also has overseas branches in Japan and Korea. The credit union is part of CU Service Centers network. Cash and check deposits can be made into your savings or checking accounts through these shared branches. CDs can then be opened by phone and funded by transfering the money from the checking or savings into the CD.

The credit union is NCUA insured with $680 million in assets and 61,000 members.

How Much Better Than The Competition?

The best 4-year CD nationally available that I'm aware of is 5.67% APY at Melrose CU. Penfed is close behind at 5.50% APY. The best bank yield for a 4-year CD is currently 5.32% at Transportation Alliance Bank.

Is Four Years Too Long?

This USA Federal CD rate may be much higher than others, but is 6% high enough for a 4-year CD when interest rates are continuing to rise? The 90-day early withdrawal penalty helps minimize this risk (both liquidity needs and opportunity cost). The typical penalty is 6-months.

One approach to help you decide on a long-term CD is to use a method I described in this post. In this method, you take the current rate on a savings account or short-term CD and try to estimate the rate that you might get when the long term CD would mature. Take the average of these two rates and compare it to the rate of the long term CD.
Steve Holt
Steve Holt   |     |   Comment #1
What are your predictions about federal fund rate increases? I assume that would be the deciding factor whether it is a smart time to go long. Even though long term rates aren't much higher than short term ones the security to lock in a rate for 2-5 years is a strong temptation. Like it was discussed previously if rates sky rocket you can just pay your penalty and get out of the CD. Decisions, decisions!
Banking Guy
Banking Guy   |     |   Comment #2
I don't think there'll be more than 3 fed funds rate hikes. If they do stop at 3, that'll put the funds rate at 5.50%. But there are a lot of things that could put pressure for higher inflation and higher interest rates. It's not an easy decision about deciding when to lock in a rate.
Anonymous   |     |   Comment #3
Only State Dept CU is higher...however, they require membership, plus a lot of money to get the rate.

Banking Guy
Banking Guy   |     |   Comment #4
Almost forgot about SDFCU. I had just posted about them on Tuesday. Great rates for those who can qualify.
Patty   |     |   Comment #5
Just requested member kit, etc from USAFC. Guy told me another plus for this CD and afterword found what he said about a one time bump up on their site:
"Step up your certificate rate!

USA Federal certificate owners have a special one time step-up option. You can convert your certificate to a better rate should interest rates rise over the duration of the certificate. This step-up option is available to Regular, Jumbo, and IRA Share Certificates of 36 months or greater. It's an excellent way to ensure you're always getting a great deal at USA Federal."
Banking Guy
Banking Guy   |     |   Comment #6
Patty, Thanks for the info. That step-up option is another plus to this CD. -Ken