PenFed has some July 4th CD specials with competitive rates. They call their CDs “money market certificates”. NCUA-insured (the credit union equivalent of FDIC-insured). The minimum opening deposit is $1,000.
Here are the early withdrawal penalties.
For certificates opened/rolled-over after May 2, 2015, the following penalties apply for certificate redemption prior the maturity.
6-month/182-day certificates: Loss of the most recent 90 days of dividends earned.
12-, 15-, 18-, 24-, 36-, 48-, 60- and 84-month certificates: Within 365 days from the open date of the certificate, the penalty will be the last 365 days of dividends earned. After 365 days from the open date of the certificate have elapsed, the penalty will be 30% of gross amount of dividends that would have been earned if the certificate had reached maturity.
Membership at PenFed is very easy now and open to anyone – you just need to deposit and maintain $5 in your Savings/Share Account.
I have had a PenFed account for over a decade now, they seem to come out with competitive CD rates at least once every few years when they need more deposits. As someone who tries to maintain a CD ladder using the top rates available, this has worked out well for me.
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At what point/amount do these rates become favorable over Ally GICs, assuming you have to pay $15 to become a member?
@Canuck – The Ally 5-year CD is much lower at 1.60% or so, and the super-short early withdrawal penalty ends really soon on December 7th. If you did buy before then, there would be a small window where the Ally CD would outperform between the 2-month to 1-year period roughly.
This is all neglecting the $15 fee, as that is dependent on CD size. PenFed has a pretty good history of good rates from time to time that I think being able to join for $15 is a great deal and may not last forever (it may be much harder to join in the future, but if you join now you are forever a member).
These rates are extraordinary. This either means Penfed strongly believes interest rates to rise fast and soon. Or that it has dug itself into a financial hole and is desperately trying to attract new deposits. I hope it’s the former because I just bought couple of 5 year CDs.
I didn’t understand your comment about Ally bank CDs. Are they changing their policy of 60 day penalty for early withdrawal?
@whytax – It is interesting considering their own 5/5 ARM mortgage product has a rate of 2.625% for the first 5 years. But this is not the first time they’ve offered this high on relative basis.
See previous post regarding Ally CD penalty changes:
https://www.mymoneyblog.com/ally-bank-cd-early-withdrawal-penalty-change.html
Thanks. Nice to know Ally is not changing terms retroactively. Penfed, which is governed by a rather toothless NCUA, might change the rules retroactively though.
Also you can become PenFed member if you are a Red Cross volunteer, which they define to include donors (of money and blood). I think I read that on this blog in the past. I donate blood semi-regularly so the way I read it that makes me eligible to be a member without any recurring monetary fee:
https://www.penfed.org/RedCross/
In fact, there is a box on their membership form:
https://www.penfed.org/13/?
Not sure if this has been mentioned before about Penfed, but they currently only allow you to transfer OUT of Penfed $5k per day. You can transfer in more than that. Now that one of my CD’s has matured, it will take a few days to get the money out. Good to know if you think you’ll be in a rush….
It gets better: can’t make more than 1 outbound transfers within a 3 day window! Got this as I tried to move out a 2nd chunk of money: “PRESENTLY, PENFED PROHIBITS THE EXECUTION OF MORE THAN ONE OUTBOUND ELECTRONIC (ACH) TRANSACTION TO AN OUTSIDE FINANCIAL INSTITUTION WITHIN THREE BUSINESS DAYS (SUNDAY IS PENFED’S ONLY NON-BUSINESS DAY) PER ACCOUNT. OUR RECORDS INDICATE THAT THIS LIMIT HAS ALREADY BEEN REACHED. YOU WILL BE PERMITTED TO INITIATE YOUR TRANSACTION ON THE FOURTH BUSINESS DAY ONCE THE WAITING PERIOD RESETS. PLEASE CONTACT PENFED IF YOU HAVE ANY QUESTIONS. (50538)”.
It’s not as convenient, but you should be able to request a check for the full amount, have it mailed to your address, and then deposit it in your other account. That was what I did when I withdrew my CD. (minus the 5 dollars that has to stay in the regular share account)
The early withdrawal penalty on existing PenFed IRA/ESA certificates will become more costly as follows:
“As of 9-1-15, IRA/ESA certificates with terms greater than 6 months, the penalty for early withdrawal in the first year will be all dividends earned. After that, the early withdrawal penalty will equal 30% of what would’ve been earned if the certificate had been held to maturity, not to exceed total dividends earned.”
I-bond is a much better alternative, given CPI won’t fall below 3.5% anytime soon.
Good point!
Penfed got wonkie with their withdrawal policy too. You can only electronically withdraw $20k every 30 days now. There is an option to request a check but it is only on their website, not app. Also keep in mind that some banks only allow deposits by photographing the check IF the check is under $10k, so you have to mail that in or go to a physical bank. (Oh, yea, learned this all from direct recent activity in trying to move funds out of Penfed…:/)
I am not sure it would be wise to lock in 3 or 5 years at those rates, let alone 15 mos, given interest rates will still be rising at least through the September Fed meeting. They should be higher in 12 days for sure.
I would also always check the Treasury Direct auction results to see how competitive the rates are. Two year Tbill was 3% at the last auction (5 yr 3.25%), though you can’t do early withdrawal on those… and you have to wait for an auction to occur vs buy on any day.
Does anybody know an easy way to calculate the early withdrawal penalties on say $20K if held longer than 365 days?
After 365 days from the open date of the certificate have elapsed, the penalty will be 30% of gross amount of dividends that would have been earned if the certificate had reached maturity.”