Can I Earn Better Interest by Saving with a Credit Union?

October 26, 2010

Anyone who’s looked at their savings account statement anytime within the last year or two knows firsthand how low interest rates for savings currently are. In an effort to keep your interest income somewhat close to where it might have been just a year or two ago, you might be looking for other savings options.

Perhaps you’ve considered opening a savings account with your local credit union. Credit unions are similar to banks, except instead of being owned by shareholders who may or may not conduct any actual banking business at the bank, a credit union is owned and controlled by its members. Here is some information and advice you can use when evaluating a credit union.

  • Credit unions are also usually much smaller than banks; in the United States, the average credit union is less than one-tenth the size of the average bank. Because of this, they are able to set the amounts of their charges and fees, as well as the interest that they give on savings, locally.
  • Because U.S. credit unions do not seek to maximize their profits, they are able to pass along the profits they make to their customers, in the form of lower fees on home, car and business loans. They also pass along the money that they make in the form of higher savings rates to their members.
  • In addition to the increased interest rates you might be able to get with a credit union, look to see what types of fees credit unions charge in connection with savings and checking accounts. Even as many banks are increasing their fees on low balances or ATM transactions, or even for conducting your business with a teller, many credit unions are able to keep these types of charges to a minimum.
  • Because of the rules that apply to how credit unions operate, however, there are a few extra steps that you need to take before you can move your savings or checking account from a bank to a credit union.
  • Each credit union has what is known as a community charter, and this charter specifies who is eligible for membership. Credit unions are generally built around a large employers (for local government or school board employees, for example), or even for residents of a particular county.
  • When considering a move from a bank to a credit union, keep in mind that small savings (in the form of higher interest rates and lower fees) can often compound if you move multiple accounts to a credit union.
  • Take a few minutes to visit your local credit union location or website to investigate the savings and checking account options. You might be able to do better for yourself than at your current banking institution.

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