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Justin Pritchard

PenFed Offers 3% CDs

By December 4, 2013

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Pentagon Federal Credit Union is making waves by offering CDs that pay more than we've seen in a long time. When was the last time you saw a "3" to the left of the decimal when looking at CD rates?

The only catch is that you (understandably) have to use a long term CD to earn the best rate. PenFed's 5 and 7 year CDs pay 3.04% APY, while shorter-term CDs pay a bit less.

Is it worth it to lock your money up for so long? It depends, of course, on a lot of things. If you value safety, these NCUA insured CDs are fairly attractive. But if interest rates rise quickly and banks offer better rates in the near future, you might miss out. It's impossible to time things perfectly, so I always think it's a good idea to take good deals when you find them and they fit your needs, but do everything in moderation.

Ken Tumin at Deposit Accounts discusses the conundrum of using these long-term CDs, and notes that the 5 year CD is probably your best bet. You don't earn any more for locking your money up for an extra two years, and it would only work in your favor if rates stay stagnant for a long time. Hopefully that won't happen, but if you think it's likely you can always go with the 7 year CD. Deposit Accounts also provides a calculator that you can use to determine whether or not it's worth cashing out of a CD early and paying the penalty.

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