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Update on PenFed's 6.00% CDs


Update: The CD rates have changed. Please check the credit union's website for the latest rates.

Update 10/13/07: The 3, 4, 5 and 7 year CD rates are now 5% APY.

Pentagon Federal Credit Union (PenFed) continues to offer 6% APY on its money market certificates with terms of 3 to 7 years. As I mentioned in my last week's PenFed post, these CD rates will likely not last the entire month as the rate table may lead you to believe.

I purchased a 3 year CD last Sunday (9/30). Since I've been a member for about a year at PenFed, I just had to log into my account. From there it was easy to open and fund a CD online. PenFed gives you 3 choices to fund the CD:
  • credit or debit card - $10K max - PenFed notes that this will be considered a cash advance on your credit card
  • Electronic funds transfer (ACH) from an external savings or checking account - $999,999 max for those who've been members for over 6 months, $25K for new members
  • Transfer from another PenFed account - no maximum listed

If you're a new member and want to open a CD with more than $25K, you can always open additional CDs. Also, you can always transfer the money into the share savings account either by wire transfer or an ACH transfer initiated at your other bank. Readers also mentioned being able to open a CD by phone without these limitations.

I chose to use the ACH transfer and pulled the funds from my GMAC money market account. The CD was opened immediately and was listed in the CD summary page. The ACH wasn't debited from my GMAC account until today (10/3).

One feature that would improve this process in my opinion is if PenFed added account verification with trial deposits to make sure that the external account you specify is the correct account. I'm not sure what would happen if you gave the wrong account number. In the terms, PenFed does state that they'll apply a fee for any rejected ACH requests.

For more info on PenFed and these CDs, please refer to my last week's PenFed post.

For questions about maximizing your NCUA coverage, please refer to the NCUA Insurance Estimator.
Related Pages: CD rates, IRA rates

Related Posts

Anonymous   |     |   Comment #1
I just joined the member this morning, and made a call to customer service and got the pin number. Then I can log into my new account after registration. But when I tried to open a new CD account, the web page shows "As a result of regulation restrictions, some accounts may not be available immediately". I called customer service again. The representative said the online application will be actived after 9 days, he suggested using wire transfer. Current my money is in FNBO which should change money for the outbound wire transferring. I have to wait 9 days. Hope promotion will last to that time.
scott   |     |   Comment #2
That surprising. I joined on Friday with $5 in the share account. Next day called and got my pin and immediately opened 4 $25k CDs. Also a big thanks to Banking Guy, I noticed a hard pull from Equifax so I took advantage of your suggestion to get a card. Heard they were generous so asked for $50k, System said that exceeded max so tried $40k, An hour later it showed approved. So when I get that card first I plan on doing with it is sending a little tip off to you
lext   |     |   Comment #3
I just wonder if anyone heard of this very good deal. I heard it on FM radio on Monday (in San Jose, CA) that Providence Credit Union is offering checking account with 6% interest. I'm sure about all the details (they repeat it again and again, it was a radio ad). The only thing I'm not 100% is the CU name, but still I'm 90% certain it's Providence. But now when I check their website there is no such thing, plus they're not in California anyway. I wonder which CU run that ad though.
Anonymous   |     |   Comment #4
I have not been able to open a CD online either. It says "Some accounts are unavailable at this time, please contact us."
I'm going to call tomorrow...Hopefully they can do an ACH from FNBO, because those are the funds I want to move as well, like the first poster.

I got my pin the other day, and filled out and mailed my signature and beneficiary card on Monday.
Alex   |     |   Comment #5
Scottrade and others ask you to log into your online banking account to verify that you own it, and some big banks support that. However, to my knowledge none of the *Direct banks (FNBO, HSBC, ING) support that for account verification.
Banking Guy
Banking Guy   |     |   Comment #6
lext, about Provident Credit Union, I have a post on this checking account here.
Mario   |     |   Comment #7
I had joined Penfed last year, opened my share account and funded the first CD right over the phone using an ACH transfer. No wait for online access required. What I liked the most was that I was able to do this on a Sunday around midnight. Penfed and bankdeals guy rock!
Anonymous   |     |   Comment #8
I think you can mail in a check to fund a CD.
Anonymous   |     |   Comment #9
What do you think about going over the amount you are eligible for in FDIC coverage?

Would you risk it?
Anonymous   |     |   Comment #10
I always feel concerned about PenFed's way of moving in funds from external accounts via ACH. All they require is the ABA and account numbers! Theoretically, anyone who knows your two numbers can deplete your account with one click. It's amazing PenFed does not seem to realize this problem, which no other banks I bank with have.
Anonymous   |     |   Comment #11
I agree anon 9:18. That is a good example of why I check my bank accounts daily. I don't trust this electronic banking. Scary. I think all banks allowing money out of an account via ACH should require approval from the account owner before it can happen. But, it is not always the case. I repeat, scary.
Anonymous   |     |   Comment #12
It's not just PenFed, virtually every credit card company allows you to pay your bill online or by phone simply by giving them a routing and account number. Most utility companies and other creditors have a similar way to pay by phone or online. All "adult" web sites have a way to pay by ACH. The list is endless.

If it's any consolation, ACH operations in the United States are governed by the rules of the North American Clearing House Association (NACHA). NACHA has one very valuable protection for consumer accounts: If a consumer submits a Written Statement Under Penalty of Perjury (WSUPP) to their bank claiming a debit was unauthorized within 60 days of when a debit clears, the bank must reverse the debit and will collect its money back from the bank that originated it.

This rule is actually much stronger than the credit card rule for chargebacks. The bank does not "investigate" the validity of the claim. The originator of the debit cannot challenge the chargeback (except they may challange whether a WSUPP was submitted within the time limit). If you submit a WSUPP within the time limit, your bank has no choice but the reverse the debit and the reversal is final. This applies only to consumer, not business, accounts. Of course, the originator of the debit is free to try to collect their money using other means, such as a lawsuit.

Federal Reserve Regulation E also provides protection against fraudulent electronic transfers from consumer accounts. There is no time limit for submitting a Regulation E claim for a fraudulent transfer. However, if a given source makes multiple transfers from your account, you may lose the right to challenge additional trasfers if you don't report the first transfer within 60 days of when the bank mails the first statement containing a fraudulent transfer. For this reason, it is important not to ignore even a small fraudulent transfer. Under Regulation E, the bank may investigate your claim and may deny it if they don't believe you. Unlike claims under the NACHA rule described above, your bank may have to eat the loss itself.

Of course, your money will disappear from your account until you notice it and report it to your bank and there can be disasterous consequences while the money is missing. But it is important for consumers to understand that they are not helpless when there has been money electronically taken from their accounts. Front line customer service people at banks are so poorly trained nowdays that they can't help consumers with these problems and will often tell consumers there is nothing that can be done in the case of a fraudulent transfer. The consumer needs to walk into the bank knowing their legitimate rights.
Anonymous   |     |   Comment #13
Hi, I am the first poster.
I called customer service todoy. The lady is nice, she unlock the online restrictions and she also helped me open the 3-years CD because the new member only can use ACH transfer $5000. You guys know $5000 is too small.
Ade   |     |   Comment #14
Hello,I thought you all be interested in a bad mistake EverBank made which reuined my day as I had emergencies to take care and instead I have to work to fix THEIR mistake: they sent ME the check and closed the account instead of waiting for Penfed to send the forms for an IRA Trustee-to-Trustee transfer.

One question to all of you finances savvy guys:

Do you think it's worth it for me to transfer to Penfed (if still in time) the following? An IRA acct. about $1,200 maturing 2010. Early w/l penalty $25 plus transfer also $25.

Also, can I do this, the transfer into Penfed, without the other bank knowing it? Because if Penfed stops the 6% I'm afraid I may remain in the limbo minus $50 for penalty and transfer fee.

Thanks so much for your suggestions! :o) Adela
Anonymous   |     |   Comment #15
I am surprised to hear that everyone is so excited about PenFed. I opened an account last year. You have to wait on the phone forever and half the times it gets disconnected so you have to call back. Not to mention the sloppy way of their ACH tranfer which does not require trial deposits. I opened a MM cd this morning and a few minutes later realized it was probably a mistake so I called them to cancel it... It has been hours since then and every rep has told me differt things and now they are telling me I will have to pay a penanly to cancel it...They are horrible...Definitely not worth the 6%..
Mario   |     |   Comment #16
I assume Penfed or the bank that the funds are drawn on do some sort of ownership verification, otherwise anyone who you have ever given a check to could empty your account using ACH transfers. TreasuryDirect also doesn't do a trial deposit verification. I think the trial deposit verification is just an alternate (maybe cheaper?) verification method.

I've only had to call Penfed once or twice and didn't have the experience to be on hold or misinformed. The again, I probably called late in the evening.
Anonymous   |     |   Comment #17
I have never had such a hard time getting a financial institution to accept my money. I have online accounts a a half dozen banks, as well as accounts at credit unions and banks locally and never had a problem until now.

I just got off the phone and they are telling me that my account must be approved by a supervisor. They say because of my situation there is a 9 day hold on any funds coming in and blah blah blah. I just want to open a couple CDs for a lousy 5 grand apiece. If I wouldn't have paid the membership dues already I would be giving up.
Anonymous   |     |   Comment #18
anon 1:43 Thank you for the valuable information on consumer's rights. Much appreciated.
Anonymous   |     |   Comment #19
I noticed that Pen Fed took off the wording that the 6.00% offer on CD's is good through October 31, 2007. Now it states "Rates are accurate as of 10/4/2007." I think Pen Fed will close the offer before the end of the month.
Anonymous   |     |   Comment #20
In response to ade who asked about transfering her IRA:

I assume you mean that Everbank sent you a check made payable to you, not to PenFed? If so then...

Assuming you have not rolled over a distribution from the same Everbank account for at least a year, you have 60 days to deposit an amount equal to the check into an IRA or qualified plan. If you get it done within 60 days, there will be no tax or penalty from the IRS for taking the distribution. You don't have to deposit the exact same check, just the same amount of money.

I assume that the penalty you refered to in your post was a penalty for early withdrawal from a CD? Because there is no tax penalty for moving your IRA.

Since you've got to deposit it somewhere, you might as well deposit it to PenFed if that is the best rate you can find. Everbank might be doing you a favor. If they waited for the paperwork from PenFed, the 6% deal might be over by the time they got the money sent. I suggest you send your IRA application and a check to PenFed today via Express Mail or FedEX overnight.

Please note that for one year after you deposit the money at PenFed, you will not be allowed to roll over any money you withdraw from your Everbank account or your PenFed account unless you do it as a direct custodian-to-custodian transfer.

Also, if Everbank withheld any taxes from your distribution, you should try to replace the amount of the tax with your own money. If you don't replace the amount withheld for tax, then that amount will be treated as a distribution that you did not roll over and you will have to pay tax plus (possibly) the 10% penalty on it. (Yes, you have to pay tax on tax money.)
Anonymous   |     |   Comment #21
One more comment for ade:

No, you don't have to tell Everbank what you did with the money. PenFed won't tell them either. Everbank will never know.
Anonymous   |     |   Comment #22
As was recently stated in this Blog, the Oct 31 date associated with the 6% CDs has been changed and is shown on a a day to day basis. I had call for something else, so I asked them what was up with that - They said a determination will be made this Monday as to pulling this offer. Looks like time may be up very soon. I just bought a 5 year today and am thinking of adding a 3 and 4 year to create a "ladder" effect. So hard to tell how long to lock up the $$.
Ade   |     |   Comment #23
Hi Mario and anonymous, how frightening about the ACH...I thought it was so perfeclty safe! What would be the alternative... IF - there's such a thing as "secure" nowadays??

Hi anonymous, the same as Mario, I never had any problem communicating with Penfed at any hour of day or evening, perhaps if you tried early morning or the latest hours? Also I had no problem with their accepting my several CDs I just opened, and I'm new to them. Could it be a coincidence? You might've gotten some stupid clerk (which I'm sorry to say abound nowadays). You must ask to speak with a supervisor or the manager. I do have problems with many other corporations and institutions on the phone - their recording methods are maddening, then comes the 3rd degree too, etc.!!! But, I guess it's for our own good, isn't it?

Also, thanks so much for your answer. Yes, Everbank sent me the entire check in MY name though I never instructed them to do that. I used to do the "60-day IRA rollovers" in the past but since last year I've been slapped with 1099Rs from all sides. To avoid this nuisance, I called IRS and was told only trustee-to-trustee will avoid them. I spent 2 days on the phone with Everbank to fix it, and with Penfed to alert them as I was afraid when Penfed forms got to Everbank they'd tell them "This account's been closed!)...I FedExed them the check (at their expense) instructing them to re-deposit it as if never withdrawn and DO NOTHING until they received Penfed forms and to follow these forms strictly without their "creative" powers. LOL! I'll see what happens next Mon. when I call them AND Penfed.. Sigh...

As to the early withdrawal penalty, I'm sorry I didn't clarify from which bank - not Everbank, but Sovereign Bank. Even though it's a small $1200 account is not maturing until 2010 at 4.5% so I did want to transfer it to Penfed. I know they'll lower the rate anytime now, but I mailed them my application yesterday, Friday, with a note that if the 6% has lowered when they get it, to call me before going ahead. Meantime I'll search other places. This Sovereign bank will charge me $50 between early w/l and transfer fee. I ask questions before opening accounts toavoid fees...but it seems in this case I missed one! I feared that in case Penfed would send to Sovereign Bank my IRA Transfer with a rate I didn't want, that once the bank closed the account minus the 50 bucks I'd have to search other places, or have to live with a Penfed low rate for the 7 years I chose. I'm glad I'll know it before contacting Sovereign.

Thanks so much for the advice on withheld taxes from my distribution. Although I never have them to withhold tases, your info is good to keep in mind just in case things change around.

Thanks again for all your help! Adela
FG9942   |     |   Comment #24
Re ACH worries, they are unfounded since the incoming funds go to a CD and money cannot we withdrawn for a week. By that time you should be able to monitor your external accounts for any fraudulent withdrawals.
One thing that is missing at Penfed is that do not offer outgoing ACH.
Ade   |     |   Comment #25
Hello FG, I'm glad to hear that ACH isn't as insecure as we all thought, thanks for the info.

When you say "Penfed do not offer outgoing ACH." do you mean they'll charge a transfer fee to move the money to another institution? And does it apply to both IRAs and non IRAs? I recall to have asked them before I sent the applications and was told they do not charge to withdraw or transfer the accounts on maturity... Adela
virgquest   |     |   Comment #26
I've been a PedFed member for about 9 months and I have 3 CDs with them. I've been very happy with their customer service and the ease of opening and funding my CDs. I have nothing but good things to say about PenFed. My only suggestion for improvement would be that it would be nice if one could fund a CD with ACH pulls from several different bank accounts. Not a huge deal though.
Tom   |     |   Comment #27
Does anyone know why PenFed calls it a 'Money Market Certificate"? Is this somehow different from a regular certificate?
Ade   |     |   Comment #28
Tom, when I opened (what I call) a 6.01% CD for 3 months at EverBank, they called it Pledge Money Market. Maybe they're trying to compete by changing the names of their instruments. So long as you see in black and white the info YOU are interested in, they can call it anything they want...LOL! However, one of these days when I'm not struggling to find a good "home" for my assets, I'll ask. :o)

I asked Penfed today about my various applications I sent them and was told the 6% rate will be good until this coming Friday. So...anyone who wants to take advantage please rush them your applications NOW! Good luck! :o) Adela