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Last Days of 5% CDs at Pentagon Federal Credit Union


A reader commented today that Pentagon Federal Credit Union will be ending its 5.00% APY CDs (terms of 3, 4, 5 and 7 years). The rate is scheduled to drop to 4.75% APY on Monday, December 1st. I just called, and a PenFed CSR confirmed this.

You still have until Sunday, November 30th to open a 5% CD. I was told if you select funding by ACH in the online application, you will receive the rate on the day of the application.

A 5% 3-year CD is the best rate currently available nationwide. National City had been offering a 5% 36-month CD for those with checking accounts, but I was just told by a National City CSR that the highest rate now is 4.50% for terms of 19 to 29 months. The next best 36-month CD rate as of today is 4.80% APY at 1st Source Bank (see my weekly rate summary).

PenFed's CDs have a minimum deposit of $1,000. They're also available as Coverdell Education Savings Certificates and as IRA Certificates. For more details about PenFed's CDs and joining PenFed, please refer to this PenFed review post.

PenFed makes it easy for anyone to join and open accounts online. If you don't qualify based on military, employer or family, you can become eligible by joining the National Military Family Association (NMFA). Please refer to How to Join Overview Page for details. Joining NMFA and Penfed can be done at the same time all online. The yearly membership for NMFA is $20, but your membership in the association does not need to be maintained to continue as a Penfed member.

In addition to high CD rates, PenFed has several other competitive banking products including a cash back Visa credit card with 5% cash back for gas purchases and auto loans with very low rates (see post).

PenFed's financial rating for soundness at Bankrate.com has improved since last year. It's now 4 stars (sound) based on 6/30/08 data (up from 3 stars last year). PenFed's rating at BauerFinancial remains at 5 stars (superior) based on 6/30/08 data.

PenFed is one of the largest credit unions in the US with $12.7 billion in assets and 846,549 members. It's federally insured by the NCUA (Charter # 227).

Thanks to the reader who reported this news in the finding the best deals post.
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Anonymous   |     |   Comment #1
I have no problem with Penfed, but I'm a bit on the fence about committing $ for 3 years or more.

Rate will stink for the next year at least , but there's a chance of a big hike in rates after that if currency inflation set's in.

Rock and a hard place for savers.
Susmita   |     |   Comment #2
Banking Guy
Banking Guy   |     |   Comment #3
That is a valid concern regarding a 3-year term. With all the government spending, there will definitely be inflation risks in the next few years.

PenFed has a 6-mo interest penalty for these CDs, so if rates do shoot up a year from now, you can break the CD, and that would equal one-year of earning 2.50%. Breaking the CD on year 2, the equivalent 2-year interest would be 3.75%.
Bozo   |     |   Comment #4
To: All
Re: 5% for 3 yrs v. 4.5% for 1 1/2 yrs

I guess to each his or her own, but in this rate environment, I'd go with 50 basis points less and the shorter term. If this new economic stimulus package really does some good, the economic impact of building infrastructure, new energy sources, you name it, will really start to kick in about 18 months from now. That's when I expect we'll see some major upward revisions in rates.

Just my $.02.