Penfed Heads-up

[Bob_Smith]

I'm in the process of becoming a member of Penfed (Pentagon Federal Credit Union). Others here have also expressed interest. In reading the fine print on the application I noticed there is a $15 per quarter charge for accounts with no activity. I emailed and told them it was my intent to open a share account and deposit the $5 minimum (which is required by them) and let that account sit idle indefinitely. I explained that it was my intention to invest in their CDs (they call them "money market certificates") and nothing else. I asked if the $5 share account they require is subject to the $15 per quarter fee. I was surprised to learn that it is. Here was the response:

"Thank you for contacting Pentagon Federal Credit Union. In order to prevent your account from going inactive we ask that you contact us at least every six month. We also need to be contacted with any address or telephone number change."

This is a strange requirement I've never seen before. I can understand the need for address change notification, but the requirement that one must contact them at least every six months seems a potential trap with a $15 per quarter cost. Thought I'd post it for those who may not be aware of it. Another thing to add to the "to-do" list.

That does sound like a "strange requirement" by Pen Fed. On the other hand, during my recent search for a
temporary parking spot for liquid cash, one bank told me that to qualify for their promo MM rate, I needed
"some" account activity each month. That's okay, but
they were very non-specific about what they meant by
"activity". I found another bank with no "activity"
requirements, unlimited check writing and free checks too. 3% APY for 90 days. Not bad in today's climate.

John Galt

[cute fuzzy bunny]

Ya gotta love banks. My dads bank constantly tries to slip little five and ten dollar charges on his statements. Every month he has to call them and have some bogus thing taken off.

Makes me love my credit union. No fees for anything, no charges for anything, ever. Period.

Hmm...penfed calls them money market certificates? Then I would presume that unlike CD's they're not FDIC insured and you wouldnt be guaranteed return of your initial principal?

I noticed that even with vanguard, unless you have a million plus with them they charge you a couple of silly small fees, principally around the brokerage account. I wonder exactly how beneficial smacking someone for a couple of bucks a year really is for the bottom line vs customer annoyance...?

[JWR1945]

Fees based on inactivity are common. They are there to make sure that you haven't died or forgotten about your account. IIRC, many states will declare an account abandoned after three or four years without activity. The interest stops but you can get your money out by claiming it.

Inactivity fees prevent passbook accounts from being worth millions of dollars after a century of compounded interest.

All that you have to do is contact them. An email is fine. A telephone call is fine. Writing a check, making a deposit or making a withdrawal is better since your get proof of your activity in your account statement.

Have fun.

John R.

[Bob_Smith]

Hmm...penfed calls them money market certificates? *Then I would presume that unlike CD's they're not FDIC insured and you wouldn't be guaranteed return of your initial principal?

Hi TH,

Certificates at Penfed are insured to $100,000 by the National Credit Union Administration. NCUA has the backing of the full faith and credit of the U.S. government and operates the National Credit Union Share Insurance Fund.

Penfed rates look pretty good. I need some money in 4 years and again in five years. TIPS maturing then yield about 0.5% and 0.8% respectively, I think I'll come out ahead with 4.75% and 5.25% at Penfed.

[Bob_Smith]

That does sound like a "strange requirement" by Pen Fed.

I thought so too, John. Fees to deal with abandoned accounts are fairly common, but this requirement that they be contacted "at least every six months" is weird. It strikes me as a small trap designed to snare fees. Nevertheless, I do think it's worth the small hassle and I plan to open an account and comply with their requirements. They should fully disclose it though. They disclose the fee for idle accounts, but they don't define "idle" (at least I couldn't find it). I had to write to them to learn that.

[ganda]

Certificates at Penfed are insured to $100,000 by the National Credit Union Administration. NCUA has the backing of the full faith and credit of the U.S. government and operates the National Credit Union Share Insurance Fund.

My understanding is a couple can have 300K insured at PenFed, 100K each and 100K joint.

[wabmester]

Somebody here pointed out that it's actually $400K -- $100K each and $200K joint, but you have to make sure the accounts are titled properly.

[ganda]

Even better Thanks, I'll look into that more.