When it comes to looking for the best CD rates, one place to consider is a credit union. Many people automatically check out their bank when shopping for CDs, but there are some great deals at credit unions as well.

There are about 5,700 credit unions in the United States, and Bankrate offers a list of the best credit unions that can help meet your financial needs — including competitive CD rates.

Here’s what you need to know about getting the best credit union CD rates.

Best credit union CD rates

If you’re looking for a good rate on a CD, here are some of the best deals on 1-year CD rates from credit unions.

  • America’s Credit Union: 1.86% APY
  • State Department Federal Credit Union: 2.12% APY
  • Bellco Credit Union: 2.05% APY
  • CommunityWide Federal Credit Union: 2.25% APY
  • Alliant Credit Union: 1.95% APY

What is a credit union CD?

Unlike a bank, which is a for-profit organization, a credit union is a not-for-profit organization. Credit unions are controlled by their members, and profits are supposed to be returned to them. This is usually done in the form of lower fees and favorable interest rates on a variety of products — including CDs.

When you choose a credit union CD, you’re getting a certificate of deposit issued through that credit union. In order to take advantage of the products and services offered by a credit union, however, you have to meet its “field of membership” requirements. These requirements include common traits that link all members.

Depending on the credit union, some of these requirements might include:

  • Employer
  • Geographic location
  • Family connections
  • Membership in a certain organization

Before attempting to open a credit union CD, check to make sure you meet the membership requirements. Many credit unions today have requirements that can be met by a broad swath of the population across the country.

Advantages and disadvantages of opening a CD with a credit union vs. a bank

One of the biggest advantages of opening a CD with a credit union is that you might have access to slightly higher yields than you’d see from more traditional banks. In some cases, though, direct — or virtual — banks might have higher CD rates than a credit union.

Before you choose a CD product, it’s a good idea to compare the best CD rates to see where you can get the best deals.

Another thing to keep in mind with a credit union is that you might be required to open a separate account in order to get a CD. For example, if you meet the membership requirements, you might have to open a “share account” and keep a set amount of money in it before you can get a CD.

With a bank, on the other hand, it’s usually possible to open a CD without the need to have any other type of account with the institution. You might have fewer hoops to jump through if all you want is a CD.

In some cases, though, you might have a better customer service experience with a member-focused credit union.

Before deciding to move forward, think about your needs and preferences. With a credit union, access to all your services might come with better terms, including lower rates on loans and potentially lower fees for account maintenance.

Are credit union CDs insured?

Just as banks have FDIC insurance to protect your deposits from bank failure, credit unions also have insurance. Your credit union CDs are insured by the National Credit Union Administration, or NCUA, which is backed by the full faith and credit of the U.S. government for $250,000 per share owner, per insured credit union, in each account ownership category.

CD products offered

Credit unions offer a wide variety of CD products, giving you the ability to choose what works best for you. In addition to one-year CDs, you can usually get credit union CDs with terms of between six months and up to five years or more. Some credit unions offer IRA CDs with terms of up to 10 years.

As with banks, your credit union CD rates depend heavily on the term length you choose. The longer your term length, the higher your CD rate. As with any CD, you’re rewarded for being willing to lock your money away for a set period of time.

Fees

The fees you’ll pay to become a credit union member vary based on the institution. Just like banks, each credit union has its own fee structure. You might have to pay monthly maintenance fees or other fees. Double-check the fee schedule before you open an account with the intent to get a good yield on a CD.

Additionally, some credit unions have a wide field of membership, but you might have to join an organization to be a part of the credit union. Depending on the organization, you might have to pay membership fees or make a donation. These donations might be $10 or more. Once you join the organization, you’re then eligible for credit union membership.

Finally, as with any CD, you’ll pay a penalty for early withdrawal. If you take your money from a credit union CD before it matures, there’s a good chance you’ll lose out on some of the interest you’ve earned so far. Before opening a CD, make sure you can afford to keep the money locked away for the full term, and review the fine print to see what the penalty is.

Credit union branch locations and online services

Thanks to technology, you might be able to join a credit union and take advantage of its CD products even if you don’t live in the local area.

In such cases, find out what the policy is for ATM fees. If your credit union belongs to a co-op, you might be able to access certain member ATMs without paying; some credit unions reimburse all your fees.

If you don’t need to worry about visiting a branch, many credit unions today offer online services, and it’s often possible to manage your account using an app.

Because it’s so easy to manage your banking from anywhere, it makes sense to include credit unions in your search for products and services. As you compare yields, don’t forget to consider credit union CD rates.

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