Pentagon Federal Credit Union (PenFed) Offers 5.25% CDs

Pentagon Federal Credit Union (PenFed) has announced its new CD rates. The highest CD pays 5.25% for a 7-year term with a $1,000 minimum deposit. Their 6-month CD only pays 3.85%. PenFed calls their CDs "Money Market Certificates." Get a full list of PenFed rates and terms here.

• Note, for shorter term CDs, I like the 5.05% APY 5-month CD offered by Wachovia Bank.

Features of PenFed CDs:

Automatic Renewal:

Your certificate will automatically renew at maturity unless you change your options via online banking. You can also call or write with other instructions.

Dividend Options for Your Money Market Certificate

You choose whether your certificate dividends are paid monthly or at maturity. You can also choose from the following dividend payment options:

1. Add your dividends to the certificate
2. Transfer them to your Regular Share, Checking, or Money Market Savings Account (MMSA)
3. Have them sent to you in the form of a check

If you choose option 1 above, then you may select any of the three options listed below for the payment of dividends at certificate maturity. However, if you select option 2 or 3 above, then your last dividend payment at certificate maturity will occur in the same manner as the payment of principal you select below.

In the case of 1-, 2-, 3-, 4-, 5- and 7-Year Certificates, choosing option 1 above produces a higher yield, as dividends will compound on the dividends paid into the certificate.

Three options also exist for the payment of principal at certificate maturity

1. Use the principal to automatically renew the certificate
2. Have it transferred to your Pentagon Federal Regular Share, checking account, or Money Market Savings Account
3. Have it sent to you by check

Locked-in Rates: Once you purchase a Pentagon Federal Money Market Certificate, the rate is locked in for the term of your certificate. The 6-Month Certificate earns dividends on a simple interest basis, while the dividends on all other certificates are compounded daily, giving you maximum returns.

PenFed says: "Your savings insured to $100,000 by the National Credit Union Administration (NCUA), an agency of the U.S. Government. Traditional and Roth IRAs (Individual Retirement Accounts) are insured to $250,000 by the NCUA. We do business in accordance with the Federal Fair Housing Law and the Equal Credit Opportunity Act.Rates are current as of December 2007 unless otherwise noted and are subject to change. "

You need to join PenFed to get their great rates. If you are not already a member of a eligible organization, you can get the rates by joining "The National Military Family Association" (NMFA), a leading non-profit advocacy organization for military families. NMFA's membership is open to anyone who supports their important work on behalf of military families. One of the benefits of membership in NMFA is that being a member makes you eligible to join Pentagon Federal Credit Union.

Get a full list of PenFed rates and terms plus information on how to join here.

• Article: How to Get the Best CD Rates
  
• Article: Beware of Annuities

Steps to Get the Best CD Rate

Some simple Steps can help you get the highest CD rates at the Best Terms from banks and credit unions.

Due to "the float" or time you are not earing interest when the bank has your money, the "best rate" may not be at the bank or credit unoin that pays the highest annual percentage rate (APY). This article tells you how to get the Highest CD Rates at the Best Terms from Banks and Credit Unions.

Do your homework:

Step #1 Find the best (highest paying) CD rate from our Highest CD Rate Survey for the term of interest

Make a list of several banks and credit unions that are at or near the top before the next step. Make colums for bank name, telephone number, interest rate, term, float for new money, float for getting your money out and "effective interest rate" after you account for any loss to the float.

Step #2 Find out if your money goes to work the day you deposit it.

We've heard reports some banks take your money then ship the forms to another state and don't credit you with interest for up to 10 days. The best places deposit the funds into your account the day they take your money and credit you with interest from that day going forward.

A rate may look great for a 4 month period but if they take 10 days after they take your money before they credit you with interest, then your effective rate is reduced significantly.

Step #3 Find out how long it takes to get your money once you request a check after the CD matures.

Ideally, you should be able to get a cashier's check from the bank teller the day your CD matures so you can take it to a new bank with a better rate. Make sure they do not close the account then send you a check in the mail as they can delay the check for many days and collect the "float" on your money until you finally get the check and deposit it into a new interest bearing account.

Step #4 Can you move money in and out electronically?

Short of geting a cashier's check and depositing it in a new back or CU on the same day where the new bank credits your account the day you make the deposite, the next best way is to transfer funds electronically (electronic funds transfer or ETF). Ideally you open the CD online at the new organization and fund it with an EFT where the money is debted from the old account on Day 1 and credited to the new account on Day 2. You only lose one day of interest this way.

The bottom line is the highest interest rate may not be the best for you. Do your homework and calculate any loss to the float. For CDs with terms of many years, the effect is small, but for many banks competing for your new funds, they offer great short term rates that may not be as good as they look due to not getting interst during the float period.

Make sure you check the "Survey of CD Rates by Term"

CD Rate Survey

From the Highest CD Rates Survey at forbestadvice.com



The best rate is 5.45% at Countrywide Bank for 3 months

6 Months
5.35% at Countrywide Bank

1 and 2 years
5.21% at Apple Bank for Savings (Scarsdale NY)

3 years
5.00% at Capital One Bank, Eastern Savings & Flagstar Bank

5 years
5.26% at Apple Bank for Savings
Apple Bank for Savings

7 and 10 years
5.10% at Capital One Bank