PenFed Certificate of Deposit

[Anonymous]

Hello FICO People, got a question about CDs and I 'll keep it nice and short. I have recently opened a few CDs with PenFed (new to CDs), I noticed today that my monthly dividend decreases from month to month across 1-5 year CDs, I thought it should increase because it compounds daily so what am I missing? I've used CD calculators and it shows monthly increase through out the term, called PenFed and the CSR, along with 2 supervisors were stunned by my question, I was told they will get back to me after checking with higher ups on Monday. I'm hoping someone here has a logical explanation for this. Thanks in advance.

[Anonymous]

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@Anonymous wrote:
Hello FICO People, got a question about CDs and I 'll keep it nice and short. I have recently opened a few CDs with PenFed (new to CDs), I noticed today that my monthly dividend decreases from month to month across 1-5 year CDs, I thought it should increase because it compounds daily so what am I missing? I've used CD calculators and it shows monthly increase through out the term, called PenFed and the CSR, along with 2 supervisors were stunned by my question, I was told they will get back to me after checking with higher ups on Monday. I'm hoping someone here has a logical explanation for this. Thanks in advance.

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If you're comparing July/August to September, the last has 1 fewer day, meaning you lost 1/31st of the interest. Is that about the difference you saw?

The effects of compound interest are nominal if you're looking at month-to-month. Also, are you taking distributions of your interest (into your checking account, etc.)? That will lower the APY as well due to the lack of compounding.

[Anonymous]

Thanks for the reply Grasshopper. The monthly distribution is setup to go back into the principal, 5 x $5000 ladder CDs setup 1 through 5 years and all 5 are acting the same way, I'll list the 1 year and the 5 year CD for reference.

1 year @ 1.30% APY

7/17/17 - 8/17/17 (31days)   $5.70  $5005.70

8/17/17 - 9/17/17 (31days)   $5.53  $5011.23

9/17/17 - 10/17/17 (30days) $5.35  $5016.58

5 year @ 2.10% APY

7/17/17 - 8/17/17 (31days)   $9.21  $5009.21

8/17/17 - 9/17/17 (31days)   $8.94  $5018.15

9/17/17 - 10/17/17 (30days) $8.67  $5026.82

[Tazman81]

This is odd.  I hope they were able to figure this out for you.  I was just about to open a set of CD ladders with PenFed, but am a bit aprehensive now.  Hopefully someone else with CDs at PenFed can chime in to let you know if they are seeing something similar.

[Anonymous]

Update - PenFed was not much help, after not getting any response by Wednesday, I called again and pretty much find myself where I started, was told again someone from technical department will be in touch. After hanging up, I took another closer look at the numbers and I think I got it figured out. Instead of closing on the 16th, which would have made first period 31 days, they closed it on the 17th making first period 32 days, this created 3 consecutive declines in days, 32-31-30. If I'm right, next period should go back up to 31 days, we'll see.

[Anonymous]

OP,  how'd it turn out?

[Anonymous]

It turned out as we suspected, the first month was an odd month with 32 days, it has been alternating between 30 and 31 days since, false alarm on my part. Sorry I forgot to update the thread.