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 5||2.79%||2.75% (no penalty)||2.74% (no penalty)|
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 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.
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.
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: