Update 12/01/13: It's official. PenFed is now offering 3% CDs (see post).
There is no official word yet, but there are reports from PenFed customer service reps that PenFed may be increasing its 5-year and 7-year CD yields in December to 3.00% APY. Currently, PenFed is offering 2.02% APY on its CDs with terms from 3 years to 7 years. A reader first emailed me this news today (Thanks!). He said he was in the process of opening a 3-year CD over the phone, and the phone rep told him that effective December 1st, the 5-year and 7-year CD yields will be 3.00%. The phone rep didn’t know what would happen to the rates of the shorter term CDs. I called PenFed, and the phone rep pretty much confirmed this news. However, she did warn that this news is not official. There’s no guarantee that the yield will be 3.00%.
It makes sense that PenFed would offer higher rates for its 5-year and 7-year CDs. Not only would you expect higher rates on longer-term CDs, but these longer-term CDs have a larger early withdrawal penalty than the shorter-term CDs.
Even though one would expect a higher rate on the 5-year and 7-year CDs, I didn’t expect 3%. That is way above the competition. The best internet bank 5-year CD rate is only 2.05% APY at CIT Bank and at GE Capital Retail Bank. The 3% doesn’t seem that high based on the brokered deposit market. At Fidelity you can get a 3.30% rate on non-callable 10-year CDs and a 2.70% rate on non-callable 7-year CDs.
If you already have opened a PenFed CD, you won’t have too much to lose if you decide to close the CD and open a new CD. You’ll just lose all interest from the initial date of the CD term. There’s no loss of principal. For a 3-year CD, the 180-day interest penalty doesn’t take effect until 180 days into the term. Before 180 days, the penalty is all of the interest earned. Please refer to my last week’s PenFed CD post for more details.
For more details about PenFed CDs and about how to join PenFed, please refer to my November 1st PenFed CD post.