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6.25% CD ?
Old 12-21-2006, 08:49 AM   #1
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6.25% CD ?

i'm reluctant to join any rumor mill, but some might be interested in the speculation.
from http://bankdeals.blogspot.com/
Quote:
There are rumors that Pentagon Federal Credit Union may be coming out with 6.25% certificates starting on December 28th and should be available for 3 months. A reader heard this from Penfed. The terms of these CDs are not known for sure but may be 3 to 5 years. As typical with Penfed, these should also be good for IRAs.

We'll have to wait for the 28th before we know for sure, but based on Penfed's history, they often come out with high rate CDs early in the year. Last year, Penfed came out with a 6% 7-year CD, a 5.75% 5-year CD and a 5.50% 3/4-year CD at the end of December (see post). For comparison, the best 60-month CD that was listed at Bankrate.com at that time was 5.15%.
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Re: 6.25% CD ?
Old 12-21-2006, 08:56 AM   #2
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Re: 6.25% CD ?

Hmmmmmm........that would be sweet. Would be a good time for me too with some new money coming in during the first quarter. Keep us informed.
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Re: 6.25% CD ?
Old 12-21-2006, 08:59 AM   #3
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Re: 6.25% CD ?

We'll know soon, but I find this hard to believe. Rates have fallen and deposit competition is not quite as aggressive as it has been.
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Re: 6.25% CD ?
Old 12-21-2006, 09:00 AM   #4
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Re: 6.25% CD ?

Since I just locked up some $ earlier this week for 15 months @5.7%, I'm sure it's no rumor. Better deals always show up right after I make my move... :P

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Re: 6.25% CD ?
Old 12-21-2006, 01:05 PM   #5
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Re: 6.25% CD ?

Quote:
Originally Posted by d
i'm reluctant to join any rumor mill, but some might be interested in the speculation.
from http://bankdeals.blogspot.com/
I bet that's no rumor, that's PenFed's latest viral marketing campaign. I think three-quarters of today's blogs are run by companies masquerading as consumers.

Thanks for the heads up. FWIW, the last time PenFed put out their three-year 6% $1000-minimum CDs, NFCU responded with an 18-month 6.25% $20K CD. So the best thing to do next week may be to wait another month for the other credit unions to catch up. As long as we sign up before the end of a month we'll probably make it.

But if PenFed is going to give me a shorter term that beats NFCU's by 125 basis points on a smaller minimum, then I just may swallow that six-month penalty and step up. It won't take long to recover from the hit and, if it ever becomes necessary to break the piggybank, I like the idea of only having to do it with smaller CDs one at a time.

When PenFed makes their offer public, I'll e-mail it to NFCU and say "Your bid"...
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Re: 6.25% CD ?
Old 12-22-2006, 03:04 AM   #6
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Re: 6.25% CD ?

So if I bought PenFed's 5.32% CD last week, is there anything that prevents my converting it into the higher rate CD? Any loss would be small compared with the gains of the new rates (if they occur). Does PenFed require me to hold the CD for a defined period before I can do this? I hope not but wouldn't everyone do this given two 6% periods followed by a drop then followed by a 6.2% within a short period of time?
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Re: 6.25% CD ?
Old 12-22-2006, 01:19 PM   #7
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Re: 6.25% CD ?

Quote:
So if I bought PenFed's 5.32% CD last week, is there anything that prevents my converting it into the higher rate CD?
i believe you'd only forfeit the interest earned ... but best you check directly with them.
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Re: 6.25% CD ?
Old 12-22-2006, 02:04 PM   #8
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Re: 6.25% CD ?

Quote:
Originally Posted by d
i believe you'd only forfeit the interest earned ... but best you check directly with them.
I just talked to PenFed and, since my transaction was not completed yet, she advised me to cancel it and put a new request through next Thursday when the rates would go to 6.25 or a few hundredths higher. So the rumor is not a rumor.
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Re: 6.25% CD ?
Old 12-22-2006, 02:42 PM   #9
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Re: 6.25% CD ?

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So the rumor is not a rumor.
great to get confirmation ... but it's not done till it's done.
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Re: 6.25% CD ?
Old 12-22-2006, 07:56 PM   #10
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Re: 6.25% CD ?

Quote:
Originally Posted by Tadpole
I just talked to PenFed and, since my transaction was not completed yet, she advised me to cancel it and put a new request through next Thursday when the rates would go to 6.25 or a few hundredths higher. So the rumor is not a rumor.
Astonishing. I cannot fathom how they could be making money with that funding cost.
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Re: 6.25% CD ?
Old 12-22-2006, 09:41 PM   #11
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Re: 6.25% CD ?

Quote:
Astonishing
yes. and should the rate actually come through, it then begs the questions: 1) how much and 2) for how long. with 5 and 10 yr treasuries in the vicinity of 4.6% it's very tempting. any thoughts or recommendations?
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Re: 6.25% CD ?
Old 12-23-2006, 04:16 AM   #12
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Re: 6.25% CD ?

Quote:
Originally Posted by brewer12345
Astonishing. I cannot fathom how they could be making money with that funding cost.
I think it is because they are a credit union and the credit union of the Penagon. They make loans for cars and mortgages at an attractive rate and have a credit card too. These are given to the some of the best credit risks in the nation, the military leadership and the high ranks in the civil service, both of which can get in trouble at work for excessive financial problems at home. The profit that they don't need to share on Wall Street is shared with members.
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Re: 6.25% CD ?
Old 12-23-2006, 05:31 AM   #13
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Re: 6.25% CD ?

Brewer: I think the financials are on line for PFCU. They do make money. REAL question is why are banks ALWAYS way below PFCU and other Credit Unions. Greed to make MORE money??

I have used CD's for over 30 years and it always has been better at Credit Unions. My current ladder of over 50 CD's (90% of them at Credit Unions) streach to 2014 and average 5.56% in return. If I had used banks it would be down around 4% and the bank would be reaping the marginal 1.56%.

I keep CD's for our IRA accounts and one CU even will adjust the interest rate upward and the term outward WITHOUT penalty when the rates become higher than when I purchased the subject CD. I know of NO BANK that would even think of doing that.

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Re: 6.25% CD ?
Old 12-23-2006, 05:47 AM   #14
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Re: 6.25% CD ?

Navy Federal Credit Union is offering 7-Year CDs @ 6% now. ($20K Min)


http://www.navyfcu.org/news/s_7YearC...tml?t=h&id=222
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Re: 6.25% CD ?
Old 12-23-2006, 07:19 AM   #15
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Re: 6.25% CD ?

Dumb question, can I transfer money directly from Fidelity to PFCU? I looked at PenFed's website but couldn't really tell. Looks like you can from a bank but not sure about brokerage firms.
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Re: 6.25% CD ?
Old 12-23-2006, 10:08 AM   #16
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Re: 6.25% CD ?

Quote:
Originally Posted by brewer12345
Astonishing. I cannot fathom how they could be making money with that funding cost.
Just like AIG, they lose a little on each customer but they're making it up in market share!

Quote:
Originally Posted by Tadpole
I think it is because they are a credit union and the credit union of the Penagon. They make loans for cars and mortgages at an attractive rate and have a credit card too. These are given to the some of the best credit risks in the nation, the military leadership and the high ranks in the civil service, both of which can get in trouble at work for excessive financial problems at home. The profit that they don't need to share on Wall Street is shared with members.
Quote:
Originally Posted by Old Army Guy
Brewer: I think the financials are on line for PFCU. They do make money. REAL question is why are banks ALWAYS way below PFCU and other Credit Unions. Greed to make MORE money??
Credit unions are non-profits and don't have some of the fixed/tax costs that burden banks. So CUs start with an "unfair" government subsidy and can pass that on to their shareholders.

I'm not so sure that PenFed has such great DoD sponsorship any more than the Navy sponsors NFCU or the other military-affiliation credit unions are sponsored. The military is happy to offer quid pro quos for contracted contributions to military welfare & recreation funds, just like they do to many other organizations and fast-food franchises, but they'll also drop them like a hot rock at the first sign of misbehavior. Witness First Command's well-earned fall from grace.

The military-affiliated credit unions have a captive audience with a steady income and a generally higher credit profile. It's the same way that GEICO used to restrict their membership. But PenFed affiliation has become a lot easier (anyone can qualify through their NMFA membership) and even NFCU has loosened up over the last decade. It's all about money changing demographics and declining military populations.

Quote:
Originally Posted by DOG52
Dumb question, can I transfer money directly from Fidelity to PFCU? I looked at PenFed's website but couldn't really tell. Looks like you can from a bank but not sure about brokerage firms.
Fidelity will do so; I've executed several from my brokerage account to PenFed.

Fidelity works with some bank (I forget the name and we don't need to remember it) to use the same system of RTNs and account numbers used by all banks. Using those numbers, Fidelity looks just like a bank as far as PenFed can tell. Fidelity can tell you exactly how to format their numbers to conform to the EFT system, and maybe even PenFed can tell you what they want from Fidelity.
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Re: 6.25% CD ?
Old 12-23-2006, 12:20 PM   #17
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Re: 6.25% CD ?

Last I saw, Pen Fed was healthy and making money. But they must be taking healthy credit risk or living with a really thin spread with these CD rates. If you are looking for a place to put FI money, I wouldtake advantage of their generous offer.
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Re: 6.25% CD ?
Old 12-23-2006, 01:04 PM   #18
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Re: 6.25% CD ?

FWIW, I just took a look at Pen Fed's September financials and they look quite robust to me. Very high loan quality, well capitalized and they make almost as much money as a commercial bank. Quite solid, IMO. I'd be perfectly comfy taking exposure to them as a depositor.
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Re: 6.25% CD ?
Old 12-23-2006, 01:17 PM   #19
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Re: 6.25% CD ?

Brewer:

so back to earlier questions: 1) how much and 2) for how long

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Re: 6.25% CD ?
Old 12-23-2006, 01:21 PM   #20
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Re: 6.25% CD ?

Quote:
Originally Posted by d
Brewer:

so back to earlier questions: 1) how much and 2) for how long

d
How much really depends on your AA, portfolio, etc. I wouldn't go over 100k simply due to an abindance of caution on credit risk. I'd regard the CDs as an attractive substitute for high grade bonds/treasuries.

How long also depends on your portfolio. I am trying to build a ladder of $10k CDs that is 5 years long. The hole in my ladder is 4 years out, so that is what I will probably buy. If you aren't trying to do a ladder, I would probably go for the 5 year CD. You can always cash it in early if rates spike, but if rates drop you will want to be in the longest CD.
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