PenFed wows with a 60-month CD that pays 3.04%

Pentagon Federal Credit Union logo

Pentagon Federal Credit Union is doing something we haven't seen in more than two years: It's offering a 60-month CD that pays more than 3% APY.

With a $1,000 minimum deposit, this Alexandria, Va.-based credit union pays 3.04% APY.

We suspect this offer — almost a full percentage point better than any other deal available to savers everywhere — is an anomaly.

That's because, even as some banks and credit unions have begun raising rates, the average yield remains stubbornly near its record low. And the Federal Reserve continues to exert huge influence over how much savers can expect to earn by setting at essentially zero the federal funds rate, which is the interest rate commercial banks pay to borrow money from the Fed.

PenFed, the third-largest credit union in the country, also pays 2.22% APY for 4-year CDs and 2.02% APY for 3-year CDs.

These CD rates are set to change Dec. 31, but with offers so far above the competition, we wouldn't be shocked if PenFed grabs all the money it needs well before the month ends and reduces rates.

How much better of an offer is this?

The top nationally available 5-year bank CD pays 2.11% APY. That’s thanks to a recent rate hike from EverBank, a primarily online bank with 14 branches in Florida that requires a $1,500 minimum deposit.

PenFed's 3-year CD is more than half of a percentage point higher than the 1.45% APY of that term’s leader, Intervest National bank, a community bank headquartered in New York City. It has one branch there and six branches in Clearwater and Pinellas counties in Florida.

The average annual yield that large banks and thrifts are offering for 5-year CDs is currently 0.79%; for 3-year CDs, 0.48%.

PenFed also pays 1.41% APY for 2-year CDs. While that’s not as spectacular as those 3-, 4- and 5-year CD rates, it does beat AloStar Bank of Commerce’s lead rate for the term. The online bank based in Birmingham, Ala., pays 1.25% APY.

Although you have to be a member of PenFed to buy its certificates of deposit, this credit union makes it simple for anyone to join — by first making a one-time donation of $20 to the National Military Family Association or of $15 to Voices for America’s Troops.

But you can avoid that if you qualify for membership through military or government service, or an affiliation with an organization specified on PenFed’s website, www.penfed.org.

Regardless of how you qualify, you can become a member easily through the online application. Once a member, you can buy CDs over the phone, online or in person at a branch.

PenFed has offices in the Washington, D.C., metropolitan area, Hawaii, New York, North Carolina, Tennessee and Texas, as well as at military bases in Guam, Japan, Portugal, Puerto Rico and Turkey.