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Pentagon Federal Credit Union — more commonly known as PenFed — is a national credit union that offers a variety of banking services, including certificates of deposit.
Learn more about PenFed CDs below.
Who is Eligible for PenFed CDs?
Though PenFed was originally designated for only customers with military ties, that is no longer the case. Now anyone can become a member, regardless of military status, simply by opening a savings account and depositing $5. Once you've opened the savings account, you're free to open other accounts like CDs.
Types of CDs Offered by PenFed
PenFed offers standard, IRA CDs, and unique Coverdell Education CDs.
The credit union's standard CDs are called Money Market Certificates and range from 6 months to 7 years.
If you're unfamiliar with an IRA CD, it's a type of retirement account that lets you invest money in a CD. This type of CD suits people who expect to retire in a few years because it's secure and low-risk. PenFed IRA certificates range from 1 year to 7 years.
PenFed also has Coverdell Education Certificates. This is a type of custodial account parents can open for minors to help pay for educational expenses.
PenFed CD Rates Today
PenFed's CD rates are much higher than the national average CD rates. Still, PenFed's rates aren't quite in line with the best CD rates currently available.
PenFed MMC Rates
A PenFed Credit Union Money Market Certificate has a $1,000 minimum opening deposit.
PenFed CD rates range from 3.00% to 4.00% APY (Annual Percentage Yield).
Here is a full breakdown of PenFed CD rates:
| CD Term | APY |
| 6 months | 3.00% |
| 1 year | 4.00% |
| 15 months | 4.00% |
| 18 months | 4.00% |
| 2 years | 4.00% |
| 3 years | 3.40% |
| 4 years | 3.20% |
| 5 years | 3.20% |
| 7 years | 3.00% |
PenFed IRA CD Rates
PenFed IRA Certificates have a $1,000 minimum opening deposit.
PenFed IRA CD rates are good, but the best IRA CD rates are even more competitive right now.
| Term | APY |
| 1 year | 3.90% |
| 2 years | 3.90% |
| 3 years | 3.30% |
| 4 years | 3.10% |
| 5 years | 3.10% |
| 7 years | 2.90% |
PenFed Coverdell Education CD Rates
PenFed Coverdell Education Certificates have a $500 minimum opening deposit. You can invest up to $2,000 annually in a PenFed Coverdell Education CD. Here are the current rates for each term.
| Term | APY |
| 1 year | 3.90% |
| 2 year | 3.90% |
| 3 year | 3.30% |
| 4 year | 3.10% |
| 5 year | 3.10% |
| 7 year | 2.90% |
What Influences PenFed CD Earnings
Choosing a CD at the right time can help you lock in a competitive rate. Be mindful of national CD trends to get the most out of PenFed CD earnings.
Since CDs also pay fixed interest rates, you should maintain funds in an account until CD maturity. Otherwise, an early withdrawal charge can take away from your total interest earnings.
We'll explain more about how these factors affect your CD earnings below.
Role of the Federal Reserve
The Federal Reserve has a committee in charge of managing the federal funds rate. Banking products, including CDs, are impacted if the federal funds rate changes. You'll see CD rates rise when the federal funds rate goes up and CD rates drop when the federal funds rate goes down.
Staying informed about when the next Fed meeting will take place can help you monitor any potential changes regarding the federal funds rate.
Reaching CD Maturity
PenFed CDs have the following early withdrawal penalties:
- For a 6-month term, the penalty is 90 days of dividends earned
- For terms longer than 6 months, the penalty is either the last 365 days of dividends earned (if withdrawal is made within the first year) OR 30% of the gross amount of dividends earned if the CD had reached its full term (for withdrawals made beyond the first year)
If you withdraw from a PenFed IRA CD before you're 59 1/2, you'll pay additional penalties. IRA CDs usually charge a 10% penalty for withdrawals made before you are 59 1/2.
Experts say choosing a CD that matches a financial goal can help you avoid penalties.
PenFed CD Pros and Cons
PenFed CD Pros
- Relatively high interest rates
- Many CD term options
- Most CDs compound dividends daily and pay them monthly
- Anyone can become a member of PenFed
- A+ rating from the Better Business Bureau
PenFed CD Cons
- Many online institutions pay even higher rates right now
- Potentially large early withdrawal penalties
- 6-month CDs do not compound dividends
Should You Invest in a PenFed CD?
PenFed CDs may be a good option if you want a CD that pays a high interest rate. Other banks and credit unions pay even higher rates right now, but PenFed CDs might be worth it if you have other accounts at PenFed and want to do all of your banking with the same company.
PenFed CD Alternatives
PenFed CDs vs. Navy Federal CDs
Navy Federal CD rates range from 2.75% to 4.85% APY on standard CDs, so the best choice between Navy Federal and PenFed could come down to which term you want. With Navy Federal, you can choose a term from three months to seven years, and rates are tiered based on the amount of your deposit.
Navy Federal pays an even higher rate — 4.15% to 5.30% APY — on the Navy Federal Credit Union EasyStart℠ Certificate. An EasyStart Certificate only requires a $50 deposit (much less than the $1,000 required for PenFed CDs).
Membership isn't as easy with Navy Federal as it is at PenFed, though. To join Navy Federal or open its CDs, you must be an active duty or retired military service member, veteran, Department of Defense employee, or immediate family member of a military member.
Navy Federal Credit Union Review
PenFed CDs vs. USAA CDs
Again, the higher CD rate between these two institutions depends on which term you choose. USAA Fixed Rate CD rates are competitive on several terms; it pays up to 4.90% APY. USAA offers more term options than PenFed, with terms as short as 30 days.
The downside of USAA is that membership is not open to just anyone. You must be a U.S. military member, veteran, precommissioned officer, or spouse or child of a current USAA member.
USAA Bank Review
Why You Should Trust Us: How We Reviewed PenFed CDs
To review PenFed CDs, we used Business Insider's certificate of deposit methodology, which considers interest rates, minimum deposit requirements, CD term variety, and early withdrawal penalties. We also look at the credit union's overall ethics, and the quality of its mobile app and customer service.
PenFed CD Rates FAQs
Are PenFed CD rates usually competitive?
PenFed CD rates are much higher than national average CD rates, but they aren't the highest rates out there right now. Some of the best online banks pay even better rates.
Do PenFed CD rates change often?
PenFed CD rates can change at any moment. That said, PenFed CDs often fluctuate because CD rates are influenced by the Fed's decisions. When there's a rate hike or rate cut, the CDs will go up or down accordingly.
What's different about PenFed CDs?
PenFed has a 7-year term, which is a unique term length that isn't usually offered by financial institutions. You can also get a variety of IRA CDs or a Coverdell Education CD at PenFed, which you might not find elsewhere.
Are PenFed CDs safe?
PenFed is a legitimate credit union. It is federally insured by the NCUA, so money in CDs is secure for up to $250,000 per depositor, per account ownership category.
Is it easy to become eligible for a PenFed CD?
PenFed membership is now open to anyone, regardless of their military ties. To become a member, you just need to fill out a form, open a savings account, and deposit at least $5.
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