With 10-year Treasury yields reaching record lows in July, I guess it should have been expected that we would see some big CD rate cuts in August. That was the case at Pentagon Federal Credit Union (PenFed) which typically makes rate changes on its CDs at the start of each month. Only its long-term CD rates were cut, and the longest terms had the biggest cuts. Its 7-year CD yield had the largest cut falling from 2.40% to 2.02%. Below is the list the new PenFed CD rates for terms of 1 to 7 years. I've also listed the old rates in parentheses. These new rates are listed in PenFed's Money Market Certificates page as of 8/1/2012.
- 2.02% APY 7-year CD (was 2.40%)
- 1.71% APY 5-year CD (was 1.90%)
- 1.51% APY 4-year CD (was 1.64%)
- 1.25% APY 3-year CD (no change)
- 0.99% APY 2-year CD (no change)
- 0.90% APY 1-year CD (no change)
PenFed calls their CDs "Money Market Certificates", but they are essentially certificates of deposit (CD) with fixed rates for specific terms.
Minimum deposit is $1,000. The rates are also available in an IRA. Even though PenFed typically maintains CD rates through the month, they no longer guarantee it. For more details about PenFed CDs, please refer to my PenFed CD review.
There's one thing that happened last year that has made PenFed's 5-year CD less competitive. Its 5-year CD early withdrawal penalty now matches the 7-year EWP: up to 365 days of interest. Note, the penalty doesn't eat into the principal so if you redeem the CD before 365 days from the issue date, you'll just lose all of the accrued interest. Please refer to PenFed's disclosure for more details (bottom of PenFed's Money Market Certificate page).
It should be noted that PenFed did the honorable thing in how it changed the EWP. The change applied only to new CDs or CDs that were rolled over. It did not apply to existing CDs. As we know, not all credit unions have done this.
Past Credit Card Changes
In addition to competitive CD rates, PenFed has been known for its competitive cash back credit card. Early this year, PenFed made a change that has disappointed many members. PenFed's Visa Platinum Cash Rewards Card used to offer 5% cash back for gas, 2% cash back on all supermarket purchases and 1.25% cash back on all other purchases. In 2011 that changed to 1% cash back at the supermarket and all other purchases. Early in 2012, that 1% was reduced to 0.25%.
PenFed introduced a new cash back card but it rewarded points instead of cash. It's called PenFed Platinum Rewards Card, and it rewards 5 points per dollar spent on gas purchases, 3 points per dollar spent at supermarkets and 1 point on all other purchases. Currently, 1 point equals 1 cent and the points can be redeemed for gift cards including a pre-paid Visa card. There are concerns that the value of points will likely decline in the future.
PenFed did make it easy for members with the original cash back credit card to switch to the new Rewards Card. Plus, they offered a nice bonus which is still available. Members get a $250 bonus for the new card with $50 coming from your first purchase and $200 if you purchase $1,000 or more during the first 3 months.
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 (one-time $20 fee) or by joining the Voices for America's Troops (one-time $15 fee). Joining one of these organizations and joining PenFed can be done at the same time all online.
To join PenFed, click on the "Join PenFed" link at the top of any PenFed page. This will take you to the start of the online application. That first page asks about eligibility. If you don't qualify via any of the listed options, click "None of the above". A popup informs users that "We can establish your membership eligibility through either National Military Family Association or Voices for America's Troops." When you close the popup, you are then asked to select one of these two organizations.
Accounts can be opened online, but for those who prefer opening accounts in an office, 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 is the third largest credit union in the nation. It has $12 billion in deposits. PenFed has an overall health score at DepositAccounts.com of 4 stars (out of 5) with a Texas Ratio of 4.17% (excellent) based on March 2012 data. Please refer to our financial overview of Pentagon Federal Credit Union for more details. It's federally insured by the NCUA (Charter # 227).
How These New CD Rates Compare
PenFed has a long history of being a rate leader for long-term CDs. So I'm afraid we may see others follow with CD rate cuts. There aren't many other nationally available 7-year CDs with yields of 2.00% or higher. As of this morning, the best deal continues to be at Patelco Credit Union which has a 2.50% APY 7-year CD and IRA CD. Navy Federal Credit Union still offers a 2.35% APY for its 7-year CD and IRA CD ($100K minimum deposit). However, not everyone can qualify for Navy Federal membership (a military connection is required).
The highest nationally available 7-year CD yield at a bank is 2.00% APY at Discover Bank (Dime Savings Bank just cut their 7-year CD yield.) Discover Bank also has a 10-year CD, but that yield has just gone down from 2.25% to 2.10%. So now it's hard to justify the 10-year CD over the 7-year CD unless you think it's going to be a very long time before we see higher rates.
The above rates are accurate as of 8:00am EDT 8/1/2012.
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: