Pentagon Federal Credit Union Offering An Attractive Set OF CD Rates
In the present low rate environment, it helps to keep an eye wide open for good deals to offset the generally lousy returns available on safe instruments. Previous posts have identified the most reasonable places to put "safe" money these days, and one of them is certificates of deposit (CDs). There is a big range in rates and terms between different depository institutions so it pays to shop around. At the moment, the institution that appears to be offering the best terms is Pentagon Federal Credit Union (Pen Fed), available at www.penfed.org. Pen Fed has a long history of offering above market yields on CDs and is one of the 5 largest credit unions in the US (and anyone can join by purchasing a 1 year membership to the National Military Family Association). Pen Fed is currently offering CDs with APYs ranging from 1.25% for a 1 year term to 2% for a 7 year term. These rates are far above what treasuries offer (less than 1% yield for 5 year money) and the 3 year rate is about the same as a 10 year treasuy. Better yet, if rates spike Pen Fed offers fixed early surrender penalties of 6 months' worth of interest for terms up to 4 years and 12 months of interest for 5 and 7 year terms. The math says that a 4 year CD yielding 1.85% APY would have an early surrender penalty of less than 1%, effectively granting the buyer of this CD a very cheap put option in the event of a rate spike.
To be clear, 2% and under yields will not blow the doors off for anyone. However, in a very low rate environment where competing CDs and treasuries offer a fraction of the interest Pen Fed is generously dispensing, this looks like rates worth grabbing. Be sure to stay below the deposit insurance maximums, or course.
Disclaimer: As always, due your own due diligence. Although it seems unlikely, you can probably lose money even buying a CD. Read the fine print and be careful. I have no affiliation with Pen Fed other than being a customer for a number of years.