Credit union's great rate not for everyone

Don TaylorQuestionDear Dr. Don,
Most money market funds pay interest rates today that aren't worth mentioning. But I looked into one credit union that pays 1.75 percent on deposits above $50,000. How can they do that? How safe is such a money market fund?
-- Henry Highrate

AnswerDear Henry,
I checked into the rate in question. It's a great rate, currently available to credit union members. Credit unions can offer higher rates on their accounts because they're nonprofit cooperatives and exempt from federal taxation.

The bad news is that this credit union, like all credit unions, limits its membership to people who have something in common. In this case, membership is open to all regular employees, temporary or contract employees, and retirees of the credit union's sponsor companies and their subsidiaries. Family members and domestic partners can also join this credit union.

From the Bankrate Investing Basics Guide "Types of banking institutions":

"Credit unions are nonprofit, cooperative financial institutions. Traditionally, people with a common bond have formed them -- they work in the same industry or are members of a particular workers' union, share the same religion, etc. Today, the membership restrictions have softened significantly. Many credit unions simply require that you live or work in a certain geographic area in order to become a member."

You can do a little investigative journalism on your own, and find a credit union in your market that you qualify to join by using the Credit Union National Association's "Locate a Credit Union" Web page.

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