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These days, rates on certificates of deposit are universally low. But for relatively higher CD rates and better rates on savings and money market accounts, savers should include credit unions in their hunt for yield.
"Unlike banks, (credit unions) don't have stockholders that are looking for a market rate of return on their investment. Credit unions can take the profits that banks would be giving to shareholders in the form of dividends and return those profits to their member depositors through higher yields on deposits, and fewer and lower fees," says Mike Schenk, vice president of economics and statistics at the Credit Union National Association.
According to Schenk, there is a difference of 16 basis points between average CD rates at banks and those at credit unions. A basis point is one-hundredth of 1 percentage point.
"That difference over time is substantially larger than that," he says. "There has been a tremendous compression in rates generally, and specifically in the difference between credit union and bank rates."
If you're in the market for a CD specifically for interest rates, leave no stone unturned in the search. It should include community banks and national banks in addition to online banks and credit unions.
If you're concerned about being able to join a credit union, don't worry. While a few credit unions are still limited to specific populations, anyone who wants to can join a credit union now should be able to find one, according to Schenk.
Where have you found the best CD rates?
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