About Ken Tumin

Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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3.90%--Ally Bank5 Year High Yield CD
3.20%$1k-PenFed Credit Union5 Year Money Market Certificate
3.00%$1k-PenFed Credit Union7 Year Money Market Certificate
Rates as of May 29, 2024.

The Best CD Rates Available Nationwide: Comparing PenFed with Ally Bank


CD rates at both Pentagon Federal Credit Union and Ally Bank have gone down lately. However, both continue to have the best long-term CD deals that are nationally available. PenFed has some of the best rates on 7-year and 5-year CDs, and its early withdrawal penalties are reasonable. Ally Bank's 5-year CD rate is lower, but it has the smallest early withdrawal penalty of any institution.

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. With only a 2-month interest penalty for early withdrawals, Ally Bank's 5-year CD continues to be the best deal if you think it's likely that the CD will be closed before 3 years. This could be due to interest rates shooting up or if you need the money. PenFed's 5-year CD has a slight advantage around 3 years. At 4 years, PenFed's 7-year CD starts to have an advantage. The 7-year CD has an early withdrawal penalty of up to 1 year of interest compared to a 6-month penalty for the 5-year PenFed CD. The higher 7-year rate starts to offset this larger penalty as more time advances from the issue date.

The early withdrawal yields listed below are based on the spreadsheet developed by Bogleheads forum members. It's available from the Bogleheads Wiki: Comparing CDs. It should be noted that the following simple formula comes very close to this spreadsheet:

Post Penalty APY = (Full APY) x (D - P) / D

D = days into term when the CD was closed.
P = days of the early withdrawal penalty

These CD rates are based on the rates listed at the institutions' websites as of 12/05/2010.

Approximate Yields After Early Withdrawal Penalties

Year of Early Withdrawal PenFed's 7-year 3.25% CD PenFed's 5-year 2.75% CD Ally's 5-year 2.40% CD
year 1 0.00% 1.37% 2.00%
year 2 1.61% 2.06% 2.20%
year 3 2.16% 2.29% 2.27%
year 4 2.43% 2.40% 2.30%
year 5 2.59% 2.75% (no penalty) 2.40% (no penalty)
year 6 2.70% n/a n/a
year 7 3.25% (no penalty) n/a n/a

I don't have any updates to the potential risks of long-term CDs that I discussed last month. This includes the risk that the bank could increase the early withdrawal penalty on existing CDs. I've received an assurance from Ally's public relations director that the penalty would not be increased on existing CDs. Allan Roth at The Irrational Investor Blog received a similar assurance from PenFed. You can review Ally's disclosure and PenFed's CD terms to make your own decision regarding this risk.

For more details on PenFed CDs and membership, please refer to my recent PenFed CD review. For more information on Ally Bank CDs, please refer to my Ally Bank CD review.

You may be able to get higher CD rates at banks or credit unions in your state. To search for the best deals available both nationwide and in your area, please refer to the CD rates and CD IRA rate tables at DepositAccounts.com.

Related Pages: Ally Bank, CD rates, IRA rates

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Previous Comments
  |     |   Comment #1
Getting ready to pull the trigger on the 5% 10 year PenFed CD Jan 1, 2011!
  |     |   Comment #2
Same here.... 5% for 10 years,,,
  |     |   Comment #3
The above two comments (Anonymous - #1 and Andy - #2) have no value for readers and should be discouraged.
  |     |   Comment #4
Comment 3 and now 4 also have no value-
  |     |   Comment #5
LOL!  Any words on the 5% 10-yr CD?  Do we need to open the CD ourselves or just leave the $$ in the share savings account?  If you reserve a CD with $XXX amount but you only have $YYY amount by then where $YYY is smaller than $XXX, would it still open the CD with $YYY for us?  Tia!
  |     |   Comment #6
If you had reserved those PenFed 5% 10yr CDs, you should see those pending CDs when you log in. I just checked mine today, and it shows that it will take the money from my PenFed regular share account at the start date in January. You should make sure you have sufficient funds in your share account before the start date.
  |     |   Comment #7
I don't suppose those PenFed 5% 10yr CDs are still available to new accounts, right?
  |     |   Comment #8
I logged into my account and cannot find the 5% cd promotion offer so I assume they yanked it. If you reserved one, then you should be able to see that information.

Ken, Can you provide the information or formula on early withdrawal Penalties for this 10 year cd. I believe it is 1 year interest for early withdrawal. It would be interesting to see the interest rate year 1 through 10 like you showed above, if you had to break the CD early.



  |     |   Comment #9
I don't believe this 5% 10-year CD has ever made available publicly.  The offer was made to people who have CD matured back in October, however, many folks were able to reserve without problem due to system error.  I believe I saw it somewhere that penfed is going to offer 10-yr CD early next year, but the rate may be lower than 5%.
  |     |   Comment #10
What's the early withdrawal penalty for the 10-year CD?  I'm not sure what withrawal penalties the above

"Approximate Yields After Early Withdrawal Penalties" table use, but you will lose 1-year interest for the 7-year CD for early withrawal.  What about 10-year CD?  Ken, is this 10-year cd not sounding good anymore if you don't plan to keep it for 10-year?  Is this the reason you'er not renewing it?

  |     |   Comment #11
Be careful with the 5% 10 year CD. Despite multiple calls over the course of the last month I have not received WRITTEN clarification on the terms for the early withdrawl penalty on this CD. I have been assured verbally on numerous occassions that the terms for this CD when held in an IRA account are identical to those for the 1-7 year CD's. In the event of a dispute with the credit union regarding early termination costs for this CD I would have nothing in writing to support my side. This is even more concerning since there is a somewhat obscure disclosure form( #687) which has deleted the wording for the ability of anyone having reached the age of 59 1/2 to take most of the principle out of a CD held within an IRA without ANY penalty so long as a minimum balance of $1000 was left in that account. This wording WAS included in form #686 which apparently has been replaced by form #687.

We have always received excellent customer service from this credit union and have multiple accounts with them so this is very surprising and disappointing to me. It makes me wonder about a potential management change at the top that's less customer friendly as is the case at some other banks and credit unions.

  |     |   Comment #12
After many phone calls I did receive a note from a Penfed rep that stated that the terms for the 5% 10 year CD are the same as the terms on all other CD's.
  |     |   Comment #13
Thanks somirad #12. 

Would the early withdrawal penalty be the same as the 7-year CD/

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