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2.17%$1k-PenFed Credit Union7 Year Money Market Certificate
2.12%$1k-PenFed Credit Union5 Year Money Market Certificate
1.81%$1k-PenFed Credit Union4 Year Money Market Certificate
1.76%$1k-PenFed Credit Union3 Year Money Market Certificate
1.51%$1k-PenFed Credit Union2 Year Money Market Certificate
1.31%$1k-PenFed Credit Union1 Year Money Market Certificate
Accounts mentioned in this post. Rates as of August 19, 2017.

PenFed Lowers CD Rates But Some Rates Remain Competitive


Pentagon Federal Credit Union (PenFed) is yet another rate leader to make cuts to its CD rates. Economic data of a slowing economy and falling Treasury yields last month had pointed to a deposit rate environment that would become worse. Unfortunately, that did happen as we saw last week when several CD rate leaders including Alliant Credit Union, Melrose Credit Union, Ally Bank and Discover Bank reduced their CD rates. In this new month PenFed joins this group with its own CD rate cuts. Below are the new CD yields for September 2010. I've noted the old yields in parenthesis.

  • 3.49% APY 7-year CD (was 3.75%)
  • 2.75% APY 5-year CD (was 3.00%)
  • 2.50% APY 4-year CD (was 2.78%)
  • 2.00% APY 3-year CD (was 2.25%)
  • 1.50% APY 2-year CD (was 1.75%)
  • 1.26% APY 1-year CD (was 1.31%)

Minimum deposit is $1,000. The rates are also available in an IRA. These yields are listed in PenFed's Money Market Certificates page as of 9/01/2010. Even though PenFed typically maintains CD rates through the month, they no longer guarantee it.

Below is an updated early withdrawal yield table that shows approximate average yields you would receive if you close these CDs early. It allows you to determine if it makes more sense to buy a long-term CD rather than a short-term CD. I also included Ally Bank's 5-year CD which has a 2.74% APY as of 9/01/2010 with only a 60-day early withdrawal penalty.

Approximate Yields After Early Withdrawal Penalties

Year of Early Withdrawal PenFed's 7-year 3.49% CD PenFed's 5-year 2.75% CD Ally's 5-year 2.74% CD
year 1 0.00% 1.38% 2.29%
year 2 1.75% 2.06% 2.51%
year 3 2.33% 2.29% 2.59%
year 4 2.62% 2.41% 2.63%
year 5 2.79% 2.75% (no penalty) 2.74% (no penalty)
year 6 2.91% n/a n/a

As you can see from the above table, if you think you're going to leave the CD untouched for at least 3 years, PenFed's 7-year CD is better than its other CD terms. Ally Bank is still the best deal if you think it's likely you'll break the CD before 4 years (either because you'll need the money or if interest rates shoot up). At year 4, PenFed's 7-year CD becomes the best deal. For more details about PenFed CDs, please refer to my PenFed CD review. For more details about Ally Bank's CDs and early withdrawal penalty, please refer to my Ally Bank CD review.

PenFed's Certificate Reservation Program

I logged into my PenFed account, and I checked the status of PenFed's certificate reservation program. I first reported on this program on August 19th. It allows select PenFed members to reserve CDs in January 2011. The best is a 5.00% APY 10-year CD. As I mentioned, I was informed that the program was only open to PenFed members who had CDs maturing in October. However, several readers who were not in the select group have commented in my post that they have been able to reserve these CDs online. I have not been able to find out if there's any chance that PenFed will not honor these reservations.

PenFed had allocated $240 million of funds for this program. As of this morning (9/01/10), there is $186.68 million left according to PenFed's Certificate Reservations page (available when you're logged in). I'm glad to see the funds are lasting. Perhaps most members are not jumping on this deal because they believe these CD terms are too long.

PenFed Membership

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.

Branch Locations

Accounts can be opened online, but for those who prefer branches, PenFed has branches in several parts of the country including Washington DC, Maryland, Virginia, New Jersey, New York, Colorado, North Carolina, Hawaii, Puerto Rico, Missouri and Texas.

Financial/NCUA Info

PenFed's ratings for safety and soundness continue to be strong: 4 stars (excellent) at BauerFinancial, 4 stars (sound) at Bankrate.com and an overall health score of 4 out of 5 at DepositAccounts.com (see our financial overview of Pentagon FCU). These ratings are based on March 2010 data except for DepositAccounts.com which is based on June 2010 data. PenFed is one of the largest credit unions in the US with $14.33 billion in assets and $11.62 billion in deposits. It's federally insured by the NCUA (Charter # 227).

Searching for the Best CD Rates

To search for the best nationwide rates and the best rates in your state, please refer to the following tables at DepositAccounts.com:

Related Pages: CD rates, IRA rates

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tomlawler   |     |   Comment #1
Congrats on calling this one ahead of time, Ken.  The rate drop makes their reserved CDs for January( 5, 7, and 10 year) look even more attractive.
Anonymous   |     |   Comment #2
Where do you find the reservation info on the PFCU pages after you log-in?  I looked everywhere and could just find the normal CD rates.

Anonymous   |     |   Comment #3
Anon#2:  If you have any CD there already, you can view this by clicking Account Actions and then Certificate Options.
Anonymous   |     |   Comment #4
Thank you - that worked well.  Now all I have to do is hope they don't notice I have nothing expiring before the end of the year -).
Bozo   |     |   Comment #5
Well, I was hoping the 3.75 would last thru September (since I am transferring an IRA CD at StateFarm to PenFed), but 3.49 is still a whole lot better than 2.28 (StateFarm's rate for a five-year, the longest they offer). For those over 59 1/2 (eligible for the no-penalty partial withdrawals at either institution), it's a major "delta". On the CD I'm transferring, the difference works out to a little over $1000/yr in interest. In my book, that counts as "serious money".

Anonymous   |     |   Comment #6
a bit off topic but not far,

See these type of articles on most financial blogs, dono just how much to put into them, but they're not looking for anything good to come out of all this.


Wonder if the site owner that stays up on all this rate stuff ever looks into this sort of thing. If true, no rate will matter. I hope its all BS.
O-Qua Tangin Wann
O-Qua Tangin Wann   |     |   Comment #7
I am posting this here, because seriously, it just is not easy to post a quick comment like it was on the old Blogspot site.

The top savings/money market account interest rate is now 1.5% (it was 1.6%) with a balance above $50k for money market account and $100k for savings account.
O-Qua Tangin Wann
O-Qua Tangin Wann   |     |   Comment #8
oops...i meant to type the name of the institution above: Fort Knox Credit Union. (Sorry.)
Anonymous   |     |   Comment #9
Still was able to get a 5yr share cert,  3.10-3.15 from Navy FCU today-

Rep thought that rates would drop on 9/10.

If you can qualify---seems like best deal around.
Anonymous   |     |   Comment #10
Yeah, I just looked a Navy Federal's rates and now they beat Pen Fed on their 2,3,5, & 7 yr CD rates.  They also have an "EasyStart" Special, which it seems you can put in $50 to $3k for 1 year and get an APY of 2.90% - This blows everything away.  The only catch is you need direct deposit.