I’m glad to see PenFed is still offering the very high CD rates. When I first reported on these on December 1st, I was concerned that they may not last through December. As I mentioned, PenFed no longer guarantees the CD rates will last for the entire month. However, I can’t remember a time when PenFed lowered CD rates before the end of the month. In addition, I see PenFed has a rotating banner on its home page advertising the 3.04% 5-year CD, and that banner says "your gift for the holidays". So it seems likely PenFed has no intention of ending these CDs early.
|2.28%||$1k||-||PenFed Credit Union||5 Year Money Market Certificate|
|1.87%||$1k||-||PenFed Credit Union||4 Year Money Market Certificate|
I thought it would be useful to highlight a few points about PenFed CDs and IRA CDs. First, if you’re wondering how PenFed’s CDs may fit into your portfolio, this post at The Finance Buff by Harry Sit should be useful. Thanks to DA member cumulus for noting this in the forum. The Finance Buff article compares the likely performance of a bond fund to a 5-year CD over the next five years. Harry concluded "[I]n most cases the CDs will come out ahead."
The second point about PenFed CDs is to keep PenFed’s 4-year CD in mind. This can be easily overlooked since the yield is much lower than the 5-year CD (2.22% APY vs 3.04%). However, the 4-year CD has one advantage. That’s a maximum early withdrawal penalty of only 180 days of interest. The 5-year CD has an EWP of 365 days of interest. If you think it’s very likely that CD rates will be going up in the next couple of years, the 4-year CD may be a better choice for you. As you can see in our CD Early Withdrawal Penalty Calculator, the effective yield of the 4-year CD is higher when closed before 28 months. After 28 months, the 5-year CD effective yield will then be higher when the 5-year CD is closed early. Thanks to DA member cumulus on bringing this point to my attention.
As we discussed many times, there are risks on using the early withdrawal strategy to maximize your short-term CD yields. However, PenFed has a history of being honorable with its early withdrawal penalty. When it increased the EWP on its 5-year CD, the larger EWP did not affect existing CDs. It only affected new CDs and CDs that had been renewed.
The third point about PenFed CDs is that they do not allow partial early withdrawals (except for IRA CDs). Thus, you may want to open multiple small CDs instead of one big CD. That would allow you to close one or more small CDs if you need some money in the future. You can see more of these CD details at the bottom of PenFed’s Money Market Certificate Application (Form 688).
PenFed’s IRA CDs have more flexibility. That’s the fourth point. According to PenFed’s IRA Application Booklet:
Partial withdrawals may be made, subject to early withdrawal penalties as described in paragraph (g) below, providing the requested withdrawal amount does not reduce the original issue below a minimum of $1,000 for 1-, 2-, 3-, 4-, 5-, or 7-year IRA Certificates, in which case the funds will be transferred to the IRA Share account.
Not only are partial withdrawals allowed, but there is no penalty "if the owner has reached age 59½ and takes a partial withdrawal." That is one of four early withdrawal penalty exceptions listed in paragraph (g). This can be a very nice feature for those with IRA CDs.
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. Our PenFed overview section has more details on PenFed’s membership qualifications.
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 York, North Carolina, Hawaii, Puerto Rico and Texas.
Credit Union Overview
PenFed is the third largest credit union in the nation. It has $12.6 billion in deposits. PenFed has an overall health grade at DepositAccounts.com of A with a Texas Ratio of 3.15% (excellent) based on September 2013 data. Please refer to our financial overview of PenFed for more details. 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: