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Navy Federal Credit Union 3% CD
Old 02-21-2014, 08:26 PM   #1
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Navy Federal Credit Union 3% CD

I see that Navy Federal Credit Union is still offering a 3% CD for a seven year term. I have never been in the navy, but it appears that if a family member has been in the Navy, they may be able to "sponsor" me. Has anyone explored trying this? Could I find a distant relative some where and ask them to sponsor me? How close do they check all this?

I'm also wondering if anyone knows what the penalty for early withdrawal is. The web site simply says there is a penalty, but doesn't state what it is. I'm guessing one year, but I can't imagine why they don't state it explicitly on the web site.

This is about the only place left that I'm aware of that is still offering a 3% CD now that the PenFed promotion is over. I have a bunch of CDs coming due this year and I'm really reluctant to open any new CDs paying less than 3%.
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Old 02-22-2014, 05:51 AM   #2
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Can't belive I missed the PenFed promotion
Planned to do a purchase on-line, but had some questions. So I had it on my calendar to stop in at the B&M in town. But life happend & I never made it.
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Old 02-22-2014, 07:11 AM   #3
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I have some cd's coming due this year also and would like to get the 3% rate. I would check with the credit union, it says they take funds nationwide. Maybe they have other stipulations like belonging to any branch of military or having kids or family with military experience. It seems to me on another post here someone said you could join penfed if you gave blood to the red cross. Maybe there are more options than you think.
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Old 02-22-2014, 07:47 AM   #4
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7 years is a long time, and 3% is very low by historic standards. Before jumping on this offer I'd want to see about the fees for getting out early (The NFCU site doesn't make it easy to find them, it looks like you have to start the application process to see the penalties. Kinda like the Navy itself: You need to join up to find out the full story!)

Chart: At what point would I like to lock in a rate for 7 years? (Sorry, I didn't find a new one, but we're still stuck at approx the same rates as 2012)



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Old 02-22-2014, 08:33 AM   #5
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OP Use search on NFCU Web-Site "Penalties" (without the quotes) will bring up a listing. Select 3rd from bottom of page 1. It is a pdf listing all of the early redemption penalties on CD's.
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Old 02-22-2014, 08:42 AM   #6
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OP Use search on NFCU Web-Site "Penalties" (without the quotes) will bring up a listing. Select 3rd from bottom of page 1. It is a pdf listing all of the early redemption penalties on CD's.
Got it - thanks OAG!

Here it is, as I suspected:

(c) If the term to maturity is greater than five years, the amount forfeited is equal to the lesser of: (1) all dividends for 365 days on the amount withdrawn, or (2) all dividends on the amount withdrawn since the date of issuance or renewal.


So one year, just like everyone else.

And yes, Samclem, I agree that locking up money for seven years is not a great idea. My only thought on that is the penalty for early withdrawal is still far less than the potential drop in NAV of a bond fund paying 3% yield if interest rates begin to rise over the next seven years.
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Old 02-22-2014, 09:38 AM   #7
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My only thought on that is the penalty for early withdrawal is still far less than the potential drop in NAV of a bond fund paying 3% yield if interest rates begin to rise over the next seven years.
That's the "good" thing about these low CD rates: A penalty consisting of one year's interest hardly hurts at all!

As long as a person thinks rates will stay low for at least a few more years and is willing to "jump" when they go up, this could be a good option (if the person doesn't want the increased growth associated with more volatile investments.)

OAG: Thanks for finding that info on the fees.
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Old 02-22-2014, 10:34 AM   #8
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Exactly. And this is one of the reasons why I have no hesitation buying 10-year CDs. The penalty for breaking them - in case the rates do go up dramatically - is very reasonable.

I bought another 10-year CD last week, 3.3%. Happy with that choice.

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Originally Posted by samclem View Post
That's the "good" thing about these low CD rates: A penalty consisting of one year's interest hardly hurts at all!

.
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Old 02-22-2014, 11:11 AM   #9
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I have a 7 year Ladder which is getting "inverted". By that I mean the out year rungs are a lower rate than the inner year rungs that are now maturing. It has obviously been that way for a while (see Sam's illustration earlier). If rates go up I don't know what I will do, but I think I will be content to just buy new long term and forget the early redemptions (I have almost never did that). Have to remember however those early redemption penalties are deductible from AGI on your taxes which mitigates them a bit.
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Old 02-22-2014, 11:30 AM   #10
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Regarding being able to join, I looked at the website and it says:
All Department of Defense (DoD) uniformed personnel—Army, Marine Corps, Navy, and Air Force Active Duty, retirees, and annuitants
All United States Coast Guard personnel—Active Duty, reservists, civilian employees, retirees, and annuitants
All Department of Defense Reservists—including Army, Marine Corps, Navy, and Air Force retirees and annuitants
All Army and Air National Guard Personnel—including civilian employees, retirees, and annuitants
All Delayed Entry Program (DEP) Personnel
All DoD Officer Candidate programs—Midshipmen and cadets at the United States Naval Academy,
United States Military Academy, United States Air Force Academy, United States Coast Guard Academy
and the United States Merchant Marine Academy; Other Officer Programs*
U.S. Government employees assigned to DoD installations (including Coast Guard)
All DoD civilian employees—including retirees and annuitants
DoD contractors assigned to U.S. Government installations
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Once your family members have joined, their family members are also eligible for membership.
Still not sure if you are eligible? Use our Membership Eligibility Wizard or call us at 1-888-842-6328

--> My question is, anyone on FIRE use this credit union before? Are you happy with them?
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Old 02-22-2014, 11:34 AM   #11
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Originally Posted by obgyn65 View Post
Exactly. And this is one of the reasons why I have no hesitation buying 10-year CDs. The penalty for breaking them - in case the rates do go up dramatically - is very reasonable.

I bought another 10-year CD last week, 3.3%. Happy with that choice.
Obgyn65,

I'm assuming that you bought a brokered CD. If that is the case, correct me if I'm wrong, but there is no such thing as a penalty for early withdrawal on those CDs. They are just like bond funds. As interest rates rise, the value of the CDs drop, with no limit on how far they can fall. The premium on a brokered CD, especially for a 10 year term, should be at least a full 1% above the market rate for a 10 year CD from a bank.
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Old 02-22-2014, 07:03 PM   #12
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You may be right. When I get the monthly statement, I can see the CD values as of today. Some CD values are up, and some CD values are down. More like bonds. The word "penalty" might not be the correct financial term.

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Obgyn65,

I'm assuming that you bought a brokered CD. If that is the case, correct me if I'm wrong, but there is no such thing as a penalty for early withdrawal on those CDs. They are just like bond funds. As interest rates rise, the value of the CDs drop, with no limit on how far they can fall. The premium on a brokered CD, especially for a 10 year term, should be at least a full 1% above the market rate for a 10 year CD from a bank.
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Old 02-22-2014, 08:54 PM   #13
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--> My question is, anyone on FIRE use this credit union before? Are you happy with them?
I use them. I have a money market, CDs, car loan and credit card with them. Having become dissatisfied with the business checking at my local bank, I will be opening up a business checking account with them even though they insist I do so at a branch (nearest one is 20 miles away). Service is pretty good, in general. Rates and terms are better than banks and competitive with Pen Fed except when they get stupid.

Navy is one of the tougher credit unions to join. You normally do need a bona fide military connection. I snuck in via the back door, but that was a one time opportunity.
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Old 02-22-2014, 08:56 PM   #14
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You may be right. When I get the monthly statement, I can see the CD values as of today. Some CD values are up, and some CD values are down. More like bonds. The word "penalty" might not be the correct financial term.
What that tells me is that you are buying brokered CDs. That means you cannot surrender them. If you want out early you sell on the open market and get what you can get. If rates go down since you bought, you will realize a gain. If rates rise, you lose money.
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Old 02-22-2014, 10:58 PM   #15
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Exactly. And this is one of the reasons why I have no hesitation buying 10-year CDs. The penalty for breaking them - in case the rates do go up dramatically - is very reasonable.

I bought another 10-year CD last week, 3.3%. Happy with that choice.
Maybe sell that one and buy an original issue CD, even at a lower rate, so you can surrender it if when rates go up?
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Old 02-23-2014, 07:18 AM   #16
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That's an idea worth considering. Thank you.
Quote:
Originally Posted by samclem View Post
Maybe sell that one and buy an original issue CD, even at a lower rate, so you can surrender it if when rates go up?
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Old 02-24-2014, 08:49 PM   #17
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Someone had posted that PenFed was offering the 3% rate to those with a maturing PenFed CD, even if the rate to everyone else dropped.

I just got a letter from them reminding me that I have a CD maturing next month, it will automatically renew at whatever the current rate is on that day; nothing about a special rate for renewals. Anyone have further info?
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Old 02-25-2014, 06:13 AM   #18
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Someone had posted that PenFed was offering the 3% rate to those with a maturing PenFed CD, even if the rate to everyone else dropped.

I just got a letter from them reminding me that I have a CD maturing next month, it will automatically renew at whatever the current rate is on that day; nothing about a special rate for renewals. Anyone have further info?
Psst - It is classified (and to my knowledge no one was ever explicitly told Feb rollovers would be a 3.04% APY either). I think the 3.04% APY was only for Feb 2014 Maturing CD's. Could be wrong. Of course you could let it rollover and if not at a rate you like grab the phone and cancel it (I am assuming if done in about the first 24 hours they would allow it - Could be wrong on that too). However you have a letter saying they will NOT rollover at 3.04% don't you?
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Old 02-26-2014, 07:20 AM   #19
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Psst - It is classified (and to my knowledge no one was ever explicitly told Feb rollovers would be a 3.04% APY either). I think the 3.04% APY was only for Feb 2014 Maturing CD's. Could be wrong. Of course you could let it rollover and if not at a rate you like grab the phone and cancel it (I am assuming if done in about the first 24 hours they would allow it - Could be wrong on that too). However you have a letter saying they will NOT rollover at 3.04% don't you?
The letter says that mine will be renewed at the rate current on that day, for the same term as original (84 months).

Your could argue that the "current rate" would be special the rate for renewals vs the "normal" rate, but I think that's a very faint hope. 2% is pretty crummy, but still the best I saw on Bankrate yesterday.
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Old 02-27-2014, 10:49 AM   #20
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Can't belive I missed the PenFed promotion
Planned to do a purchase on-line, but had some questions. So I had it on my calendar to stop in at the B&M in town. But life happend & I never made it.
What promotion? Do tell!
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