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Credit unions help boost CD rates

By Claes Bell, CFA · Bankrate.com
Monday, October 1, 2012
Posted: 4 pm ET

Ultra-low CD rates got you down? You might have better luck at your local credit union.

A recent study sponsored by the National Association of Federal Credit Unions finds that savers nationwide have gotten a boost from credit unions in recent years.

The authors of the study, Robert M. Feinberg of American University and Douglas Meade of the Interindustry Economic Research Fund, looked at how credit union members fared compared to bank customers on a broad range of financial products, including CDs, from 2005 through 2011.

According to the study, savers did much better at credit unions than at banks. Interest rates on savings at credit unions were 25.5 percent higher, on average, than at U.S. banks. In total, credit union members enjoyed up to $2.09 billion annually in higher savings yields compared to bank customers.

Interestingly, the presence of a healthy credit union industry doesn't just benefit credit union members -- it also helps bank customers get better CD rates, according to the study. If credit union market share declined by half, Feinberg and Meade estimate yields on three-month CDs at banks would fall 9 basis points on average because of decreased competition.

What do you think? Do credit unions have better CD rates, in your experience?

Follow me on Twitter: @ClaesBell.

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