It looks like Navy Federal Credit Union finally decided to respond to PenFed’s competitive CD rates. Navy Federal just increased its long-term CD rates, and there’s one CD with a rate that’s higher than what PenFed is offering. Navy Federal’s highest CD rate is now 3.10% APY. That requires a 7-year term and a minimum deposit of $100,000. This just tops PenFed’s 3.04% APY. Navy Federal offers CDs in IRAs and ESAs with the same rates as the regular CDs. Below is a summary of the new long-term Navy Federal CD rates for a $100K minimum deposit and how much they have changed. The rates are 5 bps lower for a $20K minimum deposit and 10 bps lower for a $1K minimum deposit:
- 3.10% APY 7 year (+130 bps)
- 2.75% APY 6 year (+105 bps)
- 2.55% APY 5 year (+95 bps)
- 2.05% APY 4 year (+60 bps)
- 1.55% APY 3 year (no change)
Thanks to DA reader pjaskate for posting on this news in a blog comment, and thanks to DA reader OAG for posting on this news in the forum.
Early Withdrawal Penalty
The early withdrawal penalty for terms over 1 year and up to 5 years is equal to up to 180 days of dividends on the amount withdrawn. The penalty for terms over 5 years is up to 365 days of dividends on the amount withdrawn. The penalty won't eat into the principal if the withdrawal is made early into the term. In those cases the penalty will equal all of the accrued interest.
The early withdrawal penalty and other CD details are listed in the Navy Federal Combined Certificate Disclosure.
Nice IRA Features and Bonuses
If you have IRA CDs at Navy Federal, you may want to consider withdrawing the funds and use them to open one of these new IRA CDs. If you have reached 70 ½, you can do this penalty free. Navy Federal IRA CDs also have some other nice features. I have more details in my post Nice IRA CD Features at Navy Federal Credit Union.
If you’re considering opening a Navy Federal IRA CD, check out its IRA promotions. The bonus is up to $200 when you open the IRA.
You can also get $50 for just joining Navy Federal. I have information on both of these promotions at this blog post.
Unlike PenFed, there's no association that can be joined to qualify for Navy Federal membership. To be eligible to join Navy Fed, you must have some connection with the military. This includes Navy, Army, Marine Corps and Air Force. Please refer to their Eligibility Checklist for the full details. Unfortunately, not all veterans will be able to qualify.
Navy Federal Overview
Navy Federal Credit Union branches are located around the US and the world.
Navy Federal is the largest credit union in the nation with $55 billion in assets and $40 billion in deposits. It has an overall health grade at DepositAccounts.com of an A+ with a Texas Ratio of 5.43% (excellent) based on September 2013 data. Please refer to our financial overview of Navy Federal Credit Union for more details. The credit union is federally insured by the NCUA (Charter # 5536).
Navy Federal vs PenFed
PenFed still has higher rates for terms from 2 years to 5 years. One thing to consider about the 5-year CD is that Navy Federal’s early withdrawal penalty is only half of that of PenFed’s. Even though most of these new Navy Federal CD rates don’t match PenFed’s CD rates, the Navy Federal rates are very competitive. Since Navy Federal is the largest credit union in the nation, it should put pressure on other credit unions to raise their CD rates.
The 3.10% APY is nice, but 7 years is a very long term. Even though 3.10% APY is high in today’s environment, it’s low compared to what was available in 2007 when both Navy Federal and PenFed were offering 6.25% CDs. If we see a return of those rates in 3 years, we may regret a 3.10% 7-year CD. That’s going to be a constant worry for us as rates slowly rise in the next few years.