Pentagon Federal Credit Union review: high APY on savings

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  • Pentagon Federal Credit Union (federally insured by the NCUA) offers in-person banking for residents of 13 US states, DC, Guam, and Puerto Rico, and you can bank digitally if you don’t live near a branch.
  • With PenFed, you’ll earn competitive rates on your savings and money market certificate balances, and you can earn interest on your checking account balance.
  • PenFed’s two weak links are its money market accounts that pay low rates, and its six-month certificates, which pay simple interest rather than compounding.
  • It’s easy to become a member of PenFed, even if you aren’t a member of the military and don’t work for what the company lists as a qualifying employer.
  • See Business Insider’s picks for the best high-yield savings accounts »

Pentagon Federal Credit Union, or PenFed, offers competitive rates on savings and certificates (the credit union version of a CD), and you may qualify to earn interest on your checking account balance. The credit union has branches in 13 US states, Washington DC, Guam, and Puerto Rico, but you can bank digitally with PenFed if you don’t live near a branch.

PenFed makes it easier to become a member than most credit unions, so it’s a good option for people who prefer a credit union to a bank but aren’t eligible to join some other credit unions.

You’re eligible if you have served in the military or work at qualifying associations or organizations. But if you don’t meet any of the regular qualifications, you can simply select “None of the above apply, but I would like to join PenFed” on the online application, and you still may be accepted. You’ll also need to pay and maintain a balance of $5 in a PenFed account.

You might like banking with Pentagon Federal Credit Union if you:

  • Want to earn a competitive APY on your savings account or certificate
  • Want to earn interest on your checking account balance
  • Plan to open a certificate with a term longer than five years
  • Are comfortable banking digitally, OR live near a branch

You might not like banking with Pentagon Federal Credit Union if you:

  • Value accounts that compound interest daily rather than monthly
  • Don’t qualify to earn interest on your checking account balance
  • Want to earn a competitive APY on a money market account
  • Don’t qualify to waive monthly fees for the checking account
  • Don’t have $1,000 to open a certificate
  • Want a six-month certificate that compounds interest
  • Aren’t comfortable banking digitally, OR don’t live near a branch
  • Details
  • Pros & Cons

    • Easy to become a PenFed member
    • Federally insured by the NCUA
    • Interest is compounded and paid monthly
    Pros
    • Competitive APY
    • $5 opening deposit
    • No monthly service fee
    Cons
    • Compounds interest monthly, not daily
    • You may find a slightly higher rate elsewhere

    The PenFed Premium Online Savings account pays a competitive APY — you can find slightly higher rates elsewhere, but it’s definitely up there. PenFed only requires $5 to open a savings account, and the credit union doesn’t charge monthly fees.

    The main downside is that your money will compound monthly, whereas many institutions’ savings accounts compound your interest daily and pay monthly.

    Monthly compounding ends up earning you less interest than daily compounding, and depending on how high your balance is, this may or may not make a big difference in how much you earn.

    Pentagon Federal Credit Union also offers a Regular Savings Account, but it pays a low APY and doesn’t offer any clear benefits over the PenFed Premium Online Savings account.

    See Business Insider’s picks for the best high-yield savings accounts »

  • Details
  • Pros & Cons

    • Easy to become a PenFed member
    • Federally insured by the NCUA
    • Interest is compounded and paid monthly
    • Waive $10 monthly fee by maintaining $500 daily balance, or setting up monthly direct deposits of $500
    • Earn interest if you receive monthly direct deposits of $500
    • Earn 0.20% APY with a balance less than $20k, and 0.50% APY with $20k to $50k
    Pros
    • Ability to earn interest on your checking balance
    • Over 68,000 ATMs
    Cons
    • $25 opening deposit
    • $10 monthly service fee
    • $1.50 fee for using out-of-network ATM
    • Interest is compounded monthly, not daily
    • Overdraft protection is a line of credit, not a transfer from your other bank accounts

    Not all checking accounts pay interest, so it’s nice that you can earn interest with PenFed Access America Checking — but you must receive monthly direct deposits of $500 or more to earn it. 

    You’ll earn 0.20% APY on balances under $20,000, and 0.50% APY on balances between $20,000 and $50,000. As with the savings account, interest compounds monthly, not daily.

    You can definitely find a checking account with lower fees than this one. PenFed charges a $10 monthly fee, although you can waive the fee if you maintain a $500 daily balance or receive monthly direct deposits of $500 or more.

    PenFed has a large ATM network, but it charges $1.50 when you use an out-of-network ATM. Many banks charge a $2.50 out-of-network ATM fee, but you can find plenty that don’t charge a fee and even reimburse any out-of-network ATM fees charged by ATM providers.

    See Business Insider’s picks for the best checking accounts »

  • Details
  • Pros & Cons

    • Terms ranging from 6 months to 7 years
    • 90 days interest early withdrawal penalty for 6-month CDs
    • For longer terms, you’ll lose all interest earned if you make an early withdrawal within 1 year of opening the certificate
    • If you make an early withdrawal after the 1-year mark, the penalty is 30% of the gross dividends you would have earned if the certificate had matured
    • Easy to become a PenFed member
    • Federally insured by the NCUA
    Pros
    • Competitive APY
    • Terms up to 7 years
    Cons
    • $1,000 opening deposit
    • High early withdrawal penalties
    • 6-month certificates earn simple interest, not compounded interest

    Don’t be thrown off by the term “money market certificate.” A PenFed Money Market Certificate serves basically the same purpose as a CD: You open an account for a set amount of time, lock in a rate, and can either access the money when the term ends or pay a fee to access funds early.

    Money market certificates are probably the credit union’s strongest product. Terms go up to seven years, whereas many banks only offer CD terms up to five years. Rates are competitive, and unlike other PenFed accounts, interest compounds daily and is paid monthly, meaning you earn more in interest.

    The six-month certificate is the weak link among the money market certificates. This certificate earns simple interest, so it doesn’t compound. With other institutions, you can find a six-month certificate that compounds interest.

    Also, beware that early withdrawal penalties are high for the shorter-term certificates. PenFed charges 365 days interest for an early withdrawal for certificates of 12 months or more. That’s not so bad for a seven-year term, but it’s steep for a one-year term.

    See Business Insider’s picks for the best CD rates »

  • Details
  • Pros & Cons

    • Earn 0.05% on balances under $10k; 0.10% on balances between $10k and $99,999; 0.15% on $100k or more
    • Easy to become a PenFed member
    • Federally insured by the NCUA
    • Interest is compounded and paid monthly
    Pros
    • $25 opening deposit
    • No monthly service fees
    • Paper checks
    Cons

    The PenFed Money Market Savings account will send you paper checks, but the account doesn’t come with a debit card. You can also find a higher APY elsewhere, especially if your balance is under $10,000. All in all, the money market account is a weak link for PenFed.

    See Business Insider’s picks for the best money market accounts »

    PenFed has 68,000 free ATMs nationwide. It also has around 50 branch locations in Washington DC, Puerto Rico, and Guam, and in the following 13 US states: 

    • California
    • Florida
    • Georgia
    • Hawaii
    • Maryland
    • Nebraska
    • New Jersey
    • New Mexico
    • New York
    • North Carolina
    • Pennsylvania
    • Texas
    • Virginia

    PenFed offers a checking and money market account, two savings accounts, and various money market certificates with terms up to seven years. Its Premium Online Savings Account and Money Market Certificates are its strongest products, and the checking account is a worthwhile option if you can opt out of the monthly fees and qualify to earn interest.

    To contact customer service with questions, call Monday through Friday, 7:00 a.m. to 11:00 p.m. ET. Or call Saturdays from 8:00 a.m. to 11:00 p.m. ET, or Sundays from 9:00 a.m. to 5:30 p.m. ET.

    You can also contact customer service via email, snail mail, or fax, but there is no live online chat option.

    Your PenFed accounts are federally insured by the NCUA for $250,000, or $500,000 for joint accounts.

     Pentagon Federal Credit UnionNavy Federal Credit Union (federally insured by the NCUA)Alliant Credit Union (federally insured by the NCUA)
    AccountsSavings, checking, money market account, certificatesSavings, checking, money market account, certificatesSavings, checking, kids savings, teen checking, certificates
    Branch locations13 US states, DC, Guam, Puerto Rico30 US states, DC, Guam, overseasOnline only
    Opening deposits$5 – $1,000$0 – $1,000$0 – $1,000
    Monthly service fees$0 – $10$0 – $10$0
    ATM accessNetwork; $1.50 out-of-network feeNetwork; refunds up to $20/month in out-of-network feesNetwork; refunds up to $20/month in out-of-network fees

    Pentagon Federal Credit Union review vs. Navy Federal Credit Union review

    Your choice between PenFed and Navy Federal will likely come down to two main factors: membership eligibility and branch locations.

    It’s more difficult to join Navy Federal than PenFed; you must be tied to the armed forces or have a family member who is already a member of the credit union.

    If you qualify to join both credit unions, your decision may rely on the closest branch. Navy Federal has more locations across more US states than PenFed.

    Maybe you’re eligible to join either credit union and have nearby branches for both institutions. Your decision could come down to which type of account is most important to you.

    PenFed pays a higher APY on your savings account balance. However, Navy Federal has more checking account options and pays a higher rate on money market accounts. When it comes to certificates, the higher rate will depend on the term length you’re interested in.

    Pentagon Federal Credit Union review vs. Alliant Credit Union review

    First things first: If you don’t like banking digitally, and you live near a PenFed branch, you should go with PenFed. Alliant is an online-only credit union with no brick-and-mortar locations.

    If you’re comfortable banking online, Alliant is a worthwhile option — we’ve listed it as on of our top picks for online banking.

    Otherwise, your choice could come down to which account you prioritize. If you want a money market account, you’ll want to go with PenFed, because Alliant doesn’t offer a money market account. PenFed also pays a higher APY for savings than Alliant.

    Alliant pays the same rate for all checking account balances. You’ll earn more with Alliant if your balance is under $20,000, but more with PenFed if your balance is over $20,000. The better APY for a certificate will depend on your term length.

    Alliant offers savings and checking accounts specifically for minors, so if you want to open accounts for your kids, Alliant might be the better fit.

    — to www.businessinsider.com

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