Most consumers don’t know the difference between a bank and a credit union. From the outside, they are similar. Both offer products like checking and savings accounts, CDs and loans. Yet, their charters and raison d'etre is very different. Banks are ‘for-profit’ institutions that seek to maximize profit for shareholders, employees, executives, partners, etc. Banks are insured by the Federal Deposit Insurance Corporation (FDIC). Credit Unions are ‘not-for-profit’ institutions that seek to maximize value for their members. Credit Unions are insured by National Credit Union Administration (NCUA). While almost anyone can open an account at a bank, credit unions often have restrictive membership requirements. The vast majority of the profit they generate is passed along to members in the form of higher rates or lower fees. Please note that they are not ‘non-profit’ and do strive to reach a surplus.
While credit unions do exclude some, they also try to attract new members. In doing so, they face competition from banks, investment firms and a disjointed economy. How does a fairly selective institution attract new members? How does it get its name out to attract the masses? One way is to offer incentives. And that is just what some are doing.
Paltelco Credit Union is offering a 5.00% APY 12 month introductory CD for brand new members. To qualify, one must never have had an account with Patelco. This credit union is open to most citizens of the US. One must deposit exactly $1,000 (no more, no less). So while the saver only realizes a gain $50, it still is better than most riskless investments for $1,000.
Another example of fairly high CD rates is Workers’ Credit Union. Membership here is limited to those that live and/or work in Massachusetts or Southern New Hampshire. Some of their ‘Special’ CD rates are: 7-Month at 1.01% APY, 15-Month at 1.60% APY, 25-Month at 1.75% APY and a 54-Month at 3.00% APY. The constraints are the following: Minimum Daily Balance Requirement to Earn Interest for CDs is $500. IRA Certificates require $1,000 minimum balance to open. To receive Member Relationship pricing one must have an active checking account with direct deposit. The 54-month CD Special has a maximum $250,000 limit per member, per account type. A member cannot be listed on another 54-month CD over the $250,000 limit. Moreover, their non-special (traditional) CDs have a tiered system, allowing for a greater interest tier with a greater deposit. This is more of an exception than a norm these days.
The Fort Knox Federal Credit Union in the greater Kentucky area is offering loyalty special CDs like the 23-Month 1.80% APY and the 14-Month 1.20% APY CD. To qualify one must live in Kentucky, Indiana or Tennessee. Membership in this credit union is fairly specific and one should see their website www.fortknoxfcu.org for information.
With the greater ‘internetization’ of banking and commerce, one may forget the pragmatic nature of going local. I know I am guilty of this. “Everything old is new again.” For a great deal on a time deposit, it may be in one’s best interest to check down the street and get reacquainted with your neighborhood financial institution.
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