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PenFed CU Raises Rates On CDs With 1-Year CD Very Competitive


In the past nine months, the rates on Pentagon Federal Credit Union’s (PenFed) CDs have been on the move, both up and down. I summarized an across-the-board CD rate increase in a September 2014 posting, noting that at the time, the 1-year CD had the most competitive rate of all the PenFed CDs.

(Note: the official PenFed title is "Money Market Certificate," but they are essentially Certificates of Deposit (CDs), with fixed rates for specific terms. For ease of understanding, I have opted to use the term "CD.")

PenFed began October with another rate increase on all CDs, with the 1-year CD, once again, the most competitive. The minimum deposit on all of PenFed’s CDs is $1K and there are no maximum balance caps. The CDs are also available as IRAs (Traditional, Roth and CESA) with the same rates, but while the Traditional and CESA both require a $1K opening deposit, the Roth can be opened with $25.

Below is a summary of the rates on PedFed’s CDs for the last three months.

Term Length August 2014 Rate September 2014 Rate October 2014 Rate
1-year CD 0.80% APY 1.06% APY 1.21% APY
2-year CD 0.90% APY 1.05% APY 1.31% APY
3-year CD 1.00% APY 1.05% APY 1.36% APY
4-year CD 1.00% APY 1.05% APY 1.41% APY
5-year CD 1.21% APY 1.21% APY 2.12% APY
7-year CD 1.21% APY 1.21% APY 2.32% APY

According to PenFed’s Savings Account Overview, the Early Withdrawal Penalties are as follows:

Certificates having a term of 1 year up to and including 4 years

If redeemed within 180 days of the issue date or any renewal date, all dividends will be forfeited.

If redeemed thereafter, but before the maturity date, dividends for the most recent 180 days will be forfeited.

Certificates with a term of 5 years or greater (applies only to certificates issued or rolled over on 3/15/11 or later)

If redeemed within 365 days of the issue date or any renewal date, all dividends will be forfeited.

If redeemed thereafter, but before the maturity date, dividends for the most recent 365 days will be forfeited.

Thanks to DA Member vjrampello for a Forum posting on PenFed’s rate change.

1.31%$1k-PenFed Credit Union2 Year Money Market Certificate
1.31%$1k-PenFed Credit Union3 Year Money Market Certificate
1.31%$1k-PenFed Credit Union4 Year Money Market Certificate
1.31%$1k-PenFed Credit Union5 Year Money Market Certificate
1.31%$1k-PenFed Credit Union7 Year Money Market Certificate
1.21%$1k-PenFed Credit Union1 Year Money Market Certificate
Accounts mentioned in this post. Rates as of October 27, 2016.


While the name "Pentagon Federal Credit Union" would suggest a field of membership limited to those in the military, PedFed membership is actually quite wide and varied, allowing for almost anyone to join. PenFed’s Membership Eligibility page lists the following options to qualify for membership:

I am in the United States Military and Uniformed Services.

I am an employee of a qualifying organization (151 listed).

I belong to the following association or organization (54 listed).

I am an employee of the United State government.

I am a relative or housemate of someone who is eligible.

I live or work at an eligible location (20 military bases).

Other (joining Voices for America’s Troops or National Military Family Association)

Membership application and/or opening a CD can be done online, or in person at any of 31 branch offices located in the District of Columbia, Florida, Hawaii, Maryland, Nebraska, New York, North Carolina, Oregon, Tennessee, Texas, Virginia, Guam, and Puerto Rico. I have not included a link to PenFed’s Membership Application page because it is time sensitive and closes after 3 minutes of inactivity; instead, please use PenFed’s home page as a starting point.

Credit Union Overview

Pentagon Federal Credit Union (NCUA Charter # 227) has an overall "A" health rating on DA, with a Texas ratio of 2.89% (excellent) based on June 30, 2014 data. In the past year, PenFed's total deposits have grown by $1.46 Billion, an excellent growth rate of 11.65%. Please refer to our financial overview of PenFed for more details.

Established in 1935, PenFed is the nation’s 3rd largest credit union, with assets in excess of $18.3 Billion and a membership of 1.3+ million members.

How the Rates Compare

When compared to other similar length of terms CDs tracked by DepositAccounts.com, with a $1K minimum deposit and available nationally, Pentagon Federal Credit Union’s 1-year and 2-year CDs are competitive:

Interest Rate Account Type Institution
1.25% APY 12-month CD Citizens State Bank (FL)
1.21% APY 1-year Money Market Certificate Pentagon Federal Credit Union
1.10% APY 12-month CD Nationwide Bank
Interest Rate Account Type Institution
1.55% APY 24-month CD Citizens State Bank (FL)
1.31% APY 2-year Money Market Certificate Pentagon Federal Credit Union
1.27% APY 2-year CD ableBanking

The above rates are accurate as of 10/3/2014.

To search for nationwide CD rates and CD rates in your state, please refer to the best CD rates section of DepositAccounts.com.

Anonymous   |     |   Comment #1
At an APR of 1.21% for 1 year, PenFed's Money Market Certificates are starting to become competitive with some of the lower yielding and/or lower balance limit (the amount that under which the higher interest rate is paid) rewards checking accounts for someone looking to park large amounts of money without having to meet the requirements of rewards checking (debit card purchases, direct deposit, bill pay, etc.).

The disadvantage is you don't have immediate access to the money in certificates the way you do for rewards checking.
CapitalClimate   |     |   Comment #17
"you don't have immediate access to the money in certificates"
One word: laddering.
Anonymous   |     |   Comment #2
Penfed usually comes out with their highest cd rates in December and January
Anonymous   |     |   Comment #3
That's what I'm waiting for since I have a certificate that matures with PenFed in December. Hopefully their rates will be competitive so I can just roll it over.
Anonymous   |     |   Comment #4
True...but what is the back up strategy?  Opened accounts with____ to add money if/when the rates change?  That is what I did.  Or?  
Anonymous   |     |   Comment #7
Thumbs up #2.  This is so true and it is well deserving of your important reminder.  I think this "October surprise" is merely an effort by PenFed to harvest whatever "low hanging fruit" they can manage to inveigle into certificates at, what are for PenFed, low rates.  We agree the real CD action at PenFed still remains in the (not too distant) future.

Added thought:

Anyone wanting high CD rates is well advised to shop in Washington, D.C., and in the nearby surrounding region.  It's what I do.  That's where all the activity is, because that's where so much of our money most recently has gone.
Anonymous   |     |   Comment #8
Penfed has a always made it a habit of having good deals in october December and January. 
Anonymous   |     |   Comment #9
Well it is October now, what kind of good deal is Penfed offering?
Anonymous   |     |   Comment #10
You guys do realize that the difference between 1.21% & 1.06% is only $1500 in interest per year (before taxes) for every $1,000,000 you're depositing, right? No one is going to argue that one is better than the other but to me both rates are a big joke.
kcfield   |     |   Comment #20
My problem with Pen Fed's cd (certificate) rates is their inconsistency. One never has any sense when one purchases one of their cds at high tide what the rates will be when they mature. Pen Fed will easily go from 3 percent to 1 percent in a year, and overall seem to have more variability than many other top tied credit unions and banks.
gregk   |     |   Comment #21
As has been noted here, however, PenFed's highest CD rates ALWAYs occur in the Jan/Feb window of any one year period.  In that respect they have been utterly consistent.  Thus, long-time PenFed investors always invest in those months, which then become always the months their CD's mature and can be rolled over at the then current highest yearly rates.  I never much pay attention to PenFed's rates during the rest of the year, and would advise anyone considering a long-term CD to simply wait until the Dec/Jan timeframe to invest with them.
gregk   |     |   Comment #22
My reference to the "Jan/Feb window" above should have read "Dec/Jan", - as I corrected further down.
kcfield   |     |   Comment #23
Greg: That is a on target observation--one I hadn't considered. I'll start looking a Pen Fed CD rates as football season comes to an end from now on!