Question about PenFed Certificate Opening

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ramsfan
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Question about PenFed Certificate Opening

Post by ramsfan »

Hi - I think there have been a few posts here and elsewhere about PenFed's current 3% rate on the 5 year Certificate (CD).

This rate has been in place for two months, and I am now ready to open one, the 3% rate is good through January 31st. Of course, I am over thinking this, but I am now wondering if the rate might tick up starting February 1.

Here is my question: I reviewed the terms and conditions of the 5 year Certificate, and it states if the Certificate is redeemed in the first 365 days after opening, that all dividends will be forfeited. Thus, it appears, that there is no risk in opening one up say today, and if the rates go up, I can redeem it, and open a new one at that time.

Am I missing anything here? The only thing I can think of is the burden it places on PenFed to do this, and I would rather avoid that, but I am missing anything else to consider?

Thanks!
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BrandonBogle
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Re: Question about PenFed Certificate Opening

Post by BrandonBogle »

Nope, you got it
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G-Money
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Re: Question about PenFed Certificate Opening

Post by G-Money »

ramsfan wrote:This rate has been in place for two months, and I am now ready to open one, the 3% rate is good through January 31st. Of course, I am over thinking this, but I am now wondering if the rate might tick up starting February 1.
I wouldn't count on it. Actually, I'd bet against it. PenFed has historically offered its best rates in December or January. PenFed's current rates are significantly higher than other banks' and credit unions' offerings. So, while rates could go up or stay put, my bet is that rates drop.
ramsfan wrote:Here is my question: I reviewed the terms and conditions of the 5 year Certificate, and it states if the Certificate is redeemed in the first 365 days after opening, that all dividends will be forfeited. Thus, it appears, that there is no risk in opening one up say today, and if the rates go up, I can redeem it, and open a new one at that time.
Correct. PenFed could rely on the language requiring 60 days' written notice before allowing you to early redeem the certificate, although it is my understanding that historically, PenFed has not required this.[/quote]
Don't assume I know what I'm talking about.
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HueyLD
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Re: Question about PenFed Certificate Opening

Post by HueyLD »

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Last edited by HueyLD on Sat Feb 07, 2015 4:36 pm, edited 1 time in total.
Scooter57
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Re: Question about PenFed Certificate Opening

Post by Scooter57 »

I just spoke to a CSR today about the CD I just opened. She said that it would be possible to do the EW with no problem if next months rates were higher. But she also told me they are swamped with applications they are processing for those 5 yr CDs. so it will be a week until my CD, mailed in with a check and received on Monday will show up on the site.

The day they receive your funds is the day whose rates you get. So you will have to overnight any application that includes a check to ensure you get the 3.04%.

Or you can do a transfer onkinye from your bank if the money is already there. Unfortunately, you can't do a transfer from a Vanguard Money Market fund.
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HueyLD
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Re: Question about PenFed Certificate Opening

Post by HueyLD »

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Last edited by HueyLD on Sat Feb 07, 2015 4:37 pm, edited 1 time in total.
Topic Author
ramsfan
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Re: Question about PenFed Certificate Opening

Post by ramsfan »

Thanks for the replies, very helpful - I went ahead and opened a 5yr certificate at 3% this week.
learning_head
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Re: Question about PenFed Certificate Opening

Post by learning_head »

Scooter57 wrote:The day they receive your funds is the day whose rates you get. So you will have to overnight any application that includes a check to ensure you get the 3.04%.
I wonder what it means that they have your funds... Cash in the account or check in the paperwork? If they have your check, and sit on it until Feb, and then actually get the funds from it in Feb, would that qualify? I was not sure, which is why I wired the money...
Browser
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Re: Question about PenFed Certificate Opening

Post by Browser »

I can't get over all the furor around this PenFed certificate paying a whopping 3% for the next half-decade. The times we live in. Guess not everybody is a stockbug... :shock:
We don't know where we are, or where we're going -- but we're making good time.
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OAG
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Re: Question about PenFed Certificate Opening

Post by OAG »

OAG=Old Army Guy. Retired CW4 USA (US Army) in 1979 21 years of service @ 38.
Scooter57
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Re: Question about PenFed Certificate Opening

Post by Scooter57 »

I sent the application and check via priority mail with delivery confirmation on Thursday. It arrived Sat. They told me they had it when I phoned Tuin myIt showed up online inmy account Weds. The money finally left my VGMMF today, Thurs.

So for future reference, a week seems like a good margin for mailed in applications. But only with 2-3 day mail
Topic Author
ramsfan
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Re: Question about PenFed Certificate Opening

Post by ramsfan »

Browser wrote:I can't get over all the furor around this PenFed certificate paying a whopping 3% for the next half-decade. The times we live in. Guess not everybody is a stockbug... :shock:
Browser, don't take this the wrong way, but I grew up in the absolute heyday of stock market, entering the workforce in the early 90's. I was interested, but not well educated on investing, so I was susceptible to Kiplinger's and Money Magazine, among many other things, that had me believe a 100% stock portfolio was ideal, along with taking out a max mortgage. Cash and CD's were taboo.

Fast forward to later in my life, and when I have settled on an asset allocation of stocks bonds and cash that makes sense for me, and I can implement and maintain consistently (thank you Bogleheads), and believe it or not.... the difference between 2% CD in the market, and a 3%, is a big deal.

I know it sounds pathetic, or trivial, but it can be a big thing.

I was the king of all stocks, until I got my butt handed to me.
desiderium
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Re: Question about PenFed Certificate Opening

Post by desiderium »

5yr rate now down to 2%
hudson
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Re: Question about PenFed Certificate Opening

Post by hudson »

desiderium wrote:5yr rate now down to 2%
from... https://www.penfed.org/Certificates_Overview/

Term Dividend Rate APY
6 Month 0.300% 0.30%**
1-Year 1.150% 1.16%
2-Year 1.250% 1.26%
3-Year 1.500% 1.51%
4-Year 1.750% 1.76%
5-Year 2.000% 2.02%
7-Year 2.250% 2.27%
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OAG
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Re: Question about PenFed Certificate Opening

Post by OAG »

FWIW the message below is from the Account Page in a PFCU account. If one has CD's maturing at PFCU in Feb 2014 are they going to apply a different interest rate to 5 & 7 rollovers versus new money? If not one can get 3% on 7 Year CD's at NFCU (Navy Federal CU).

From PFCU Account Page:

"Important Message: If you haven’t done so already, please review the maturity options for your certificate(s) maturing this month by clicking the following link. This gives you the ability to manage certificate rollovers, distribution of funds at maturity, and your monthly dividend payments. Please review your elections today."
OAG=Old Army Guy. Retired CW4 USA (US Army) in 1979 21 years of service @ 38.
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stevewolfe
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Re: Question about PenFed Certificate Opening

Post by stevewolfe »

Yes, when I spoke to a representative yesterday they said that the 3.04% APY rate would continue in February as a bonus for folks who had CD's maturing in that month.
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Leif
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Re: Question about PenFed Certificate Opening

Post by Leif »

I was just checking and I was surprised to see PenFed 5 and 7 year rates now at 1.75%, and 3 year is 1.25%. I'm glad I backed up the truck when rates were 2% at 3 year and 3% for 5 year. They are almost down by half.
Topic Author
ramsfan
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Re: Question about PenFed Certificate Opening

Post by ramsfan »

Yep Leif - same here. You are earning 71% more interest on your 5 year at 3%, than you would be if you opened it today at 1.75%.
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