I have a favorite podcast. It’s called Planet Money, produced by NPR, and it bills itself as “The economy explained, with stories and surprises”. I’ve listened to hundreds of the show’s short episodes over the years, but one has been my favorite ever since it aired in 2010. It’s succinctly titled "Why Gold?" and it immediately came to mind when I conceived of the analysis we’re about to dig into.
That’s because “Why Gold?” started with the periodic table of Earth’s 118 elements and, criteria by practical criteria, whittled it down to answer the question of why gold – not actinium, strontium, or any of the other contenders – has been used as money for millennia. With the help of a chemical engineering professor, they approached the periodic table as a bingo card of sorts, crossing out columns, rows and individual elements for any characteristic that would be unsuitable for money... These ones are gases and can’t be stored. Those will burn through concrete if exposed to air. This group is radioactive and will kill you.
It was fascinating. And did indeed result in the shiny yellow metal surviving as the last element standing.
We’re going to do something similar here today, though I can’t deliver the drama of spontaneous combustion or death by half-life. I won’t be dropping names as fun as Einsteinium and Ununoctium. And I can’t even promise we’ll land on a single winner (spoiler alert: we won’t). But if you’re a savvy saver who aims to maximize the returns from your deposit accounts, there’s a good chance you’ll find this analysis interesting and useful, even if “fascinating” might be pushing our luck a bit.
A Periodic Table of Credit Unions
Anyone who’s hung out on this site for a while knows that DepositAccounts.com publishes something called “The Big List of Credit Unions Anyone Can Join.” Updated regularly, the list comprises 108 credit unions whose field of membership is broad enough to include anyone in the country, regardless of their state of residence or employer affiliation. The most common way this is handled according to the credit union industry’s rules is by requiring the individual to donate to or join a nonprofit organization or association, thereby gaining eligibility to join the credit union. And sometimes the cost to do this is exceptionally small, or even free.
So, theoretically, these are great credit unions to be aware of, if you’re the type who shops around for the best deals on savings, checking, and certificate of deposit accounts. I say theoretically, though, because if they don’t offer something of value to you, then it makes no difference if they’re easy for you to join.
What I’ve set out to do is evaluate how worthy these 108 credit unions are for a smart saver’s portfolio. Is there one or a few that are the best of the best? Is there a handful of great all-around credit unions that would be worth joining to get a variety of great rates from a single institution? Surely some of these are not especially competitive, but how many get swept into that trash bin?
I decided to begin with our own periodic table of institutions and start applying criteria that a great credit union would exhibit, eliminating any that fall short of those traits. The goal was to see how tightly I could trim this list to comprise only the most worthwhile national credit unions out there.
The first cut is the deepest
A number of factors can make one credit union more appealing than another, such as the ability to bank there in person, the financial health of the bank, customer reviews, and the cost and ease of joining. But let’s face it: none of these trump rates. A credit union can have shared branches all over the U.S., have a great star rating from DA readers, have a healthy A+ rating, and be free to join to boot. But none of that is worth a dime if all its rates are mediocre, or worse. So we start with rates.
I handled this by looking at five common deposit products – savings/money market accounts, rewards checking accounts, 1-year CDs, 3-year CDs, and 5-year CDs – and pulling each credit union’s rates for those products on May 1. For balance amounts, we stipulated $5,000 in a savings/money market account; $500 in a checking account; and $10,000 in a CD.
With APYs in hand, I next developed a star rating system for each institution’s most recent rate, all of it relative to what a customer could earn from the top nationally available banks on that same May 1 date. In other words, for each of the 108 CUs, I was able to determine a star rating (up to 5 stars) for their savings/money market rate, their rewards checking rate, and their 1-, 3- and 5-year CD rates, resulting in five ratings for each credit union (unless they don’t offer one of the product types).
With each credit union’s five product rates now carrying a score, I could filter on these to see how many of the credit unions have competitive rates versus how many don’t. But how to filter? My assumption is that savvy rate shoppers won’t go to the trouble of joining a new credit union unless it’s for a rate of at least 4 stars, meaning at least as good as they can get from a top nationally available bank (otherwise, why bother?). While you might accept a 3-star savings account rate, for example, at an institution where you hold 4- or 5-star CDs, a credit union with only 3-star (or lesser) product rates simply holds no appeal.
So that became the first cut: all the credit unions that didn’t have at least one 4- or 5-star rate on May 1. And the results? They were dramatic. Of the 108 credit unions, 70 were instantly eliminated, leaving us with 38 to further consider.
Although there’s still a lot more to come in this analysis, we can already draw some major conclusions from this chart. For one, we now know that about two-thirds of the credit unions on the all-access list aren’t worth the trouble of joining unless they announce a special deal. Fortunately, any credit union that unveils a competitive rate and is on the all-access list will almost certainly trigger Ken’s radar for coverage on the blog, so following along there will keep that base covered.
Two, we can see already that this will not boil down to a single winner that’s a great “all-around” choice. Only six credit unions have a great rate in more than one category, and three rankings is the most any institution earned. And the credit unions who had three notable showings –Melrose, PenFed and Signal Financial –only rate well in the CD categories. So there simply are no institutions offering competitive rates across the full spectrum of liquid and certificate accounts.
Another way of saying there is no all-around winner is to say the remaining list is chock full of one-hit wonders, and per usual, savvy savers are going to want to shop around for the best rate on the product they’re seeking. While having everything housed at one credit union or bank would be wonderful, it necessarily comes with the opportunity cost of earning a lesser return. So savers will need to make a personal decision on what they prioritize higher: convenience or earnings.
At this point the best end goal we can strive for is to identify the worthiest credit unions for specific products, as there are different winners in every category. And identifying the worthiest equates with eliminating the lesser apples.
Strikes that eliminate
The vast majority of credit unions are federally insured by the NCUA. But there are a handful that have gone the route of securing private insurance instead. While some readers might debate that private insurance isn’t any more risky than relying on federal insurance, the majority of consumers feel safer sticking to NCUA-insured credit unions. We therefore checked our list of 38 institutions and, sure enough, two of them – Clark County Credit Union and SafeAmerica Credit Union – are privately insured, eliminating them from our list.
Next up is the credit union’s financial strength. Again, one can argue how important financial health is when choosing to join a credit union, considering all deposits up to $250,000 are insured. But some savers sleep better at night when they bank only with the strongest institutions, such as those receiving grades of A+ or A, or perhaps B+.
In any case, the elimination of one credit union on our remaining list is unlikely to be controversial, and that’s Melrose. Many of you will know that Melrose was put into conservatorship by the NCUA in February, in a move to protect member assets in light of serious financial struggles at the credit union. Melrose’s troubles stem from the collapse of the New York taxi medallion market, which it had heavily financed before on-demand ride services like Uber significantly undermined the fair market value of medallions.
Besides Melrose, all but one credit union on the remaining list has a financial health grade of B+ or better. The one exception is Xcel Federal Credit Union, which is rated C+. Since not everyone will agree that is low enough to disqualify it, I will note Xcel as on probation until we learn more about its further pros and cons.
Customer reviews were the next factor I considered. These are not as concrete a measure as the other criteria employed, since the individuals completing a review on DepositAccounts.com self-select (as opposed to being drawn by a random survey), and also because not every institution has received enough reviews from which to draw reasonable conclusions. In fact, seven of the remaining credit unions have no reviews on our site at all, and three have just a single review.
Still, shared consumer experiences can be useful to identify any red flags, especially when multiple reviews seem to convey a pattern of poor customer service. The one true loser here is Xcel Federal Credit Union, which has 7 reviews averaging just 1.4 stars. Words like “nightmare” and “never again” are in the reviews, and five of the seven reviewers gave the lowest score of 1 star. Given Xcel’s already probationary status, this seals its fate as off our list.
One other credit union has at least 5 reviews and an average below 2 stars, and that’s Blue Federal Credit Union, at 1.94 stars. But as we did with Xcel, we’ll let Blue remain unless it suffers another strike as we continue.
I also looked at institution age and asset size, to see if there were any very new or very small credit unions that might give a saver pause. The youngest is Self-Help Federal Credit Union, which was started in 2008. But its financial rating is respectable at a B+, and its asset size a sufficiently large $717 million, so the fact that it’s relatively new doesn’t seem grounds for dismissal.
Also relatively young is Latino Credit Union, established in 2000. It now has a 17-year track record, and carries an A financial rating. So here again, we’ll allow Latino to stay on the list for now.
The smallest credit union of those remaining is United Educators Credit Union, with $174 million in assets. Institutions with limited assets can sometimes be unappealing because they don’t have as many resources to invest in things like their bank website or mobile apps. But United Educators’ site is on par with most other credit union websites I’ve seen, with both online banking and online account opening available. United Educators also has an A financial rating, so we’ll keep it on the list despite its small size.
The last qualifier I considered is cost of membership. Most of those remaining on the list are free or very inexpensive to join. But there is a small group that are relatively price, and therefore perhaps not worth the investment. I decided to draw the line at $20. At that price, one’s membership costs erode any earned interest more than I think astute savers would like to see.
Setting this threshold, 10 more credit unions were eliminated, ranging from a cash outlay (e.g., fees, donations, and/or minimum deposits to a share savings account) of $20 to $65.
Little grounds are now left on which to outright disqualify contenders. But before looking in-depth at the 24 finalists that remain, let’s review whom we’ve eliminated and why. In some cases, one of these credit unions might be an acceptable choice for you personally, given your comfort level with insurance type, financial health, and cost of membership. Eliminating them from our list of finalists isn’t a statement that they are unacceptable or poor credit unions. It means only that they are beat out by stronger, more attractive contenders.
A final walk in front of the most important judge: You
As we’ve seen, all but 24 credit unions on the all-access list have had one or more reason to recommend against them. But it’s essentially impossible to pick any one as a final winner out of those that remain. True, PenFed holds the highest honor of being the top contender in three product categories, while most of the rest are one-product ponies. But if, for instance, you’re looking for a great rewards checking account and PenFed excels in 1-, 3- and 5-year CD rates, their triple top status is no winner for you.
That’s why we culminate this long elimination process not with a single winner, but by distilling the final contenders into various product rankings that make it easy for savers to find their own top choice.
Of course, in addition to these point-in-time rankings, anyone can (and should) review the top real-time rates by searching DepositAccounts.com’s CD, savings, and checking rate tables before opening any bank account, as well as minding the blog for entries on any recently released, newsworthy rates.
As with all things consumer, your own “best credit union” will depend on your personal priorities, such as maximizing return vs. only joining an institution that many others have reviewed well. And your choice will depend also on how you prefer to use the product – e.g., is conducting 12 debit transactions per month a cake walk for you, or would that be burdensome? Or are you really only after CDs? How credit unions stack up in these different ways is what we can outline for you, leaving it to you to make your own customized call .
Whatever choices you do make, we hope the sifting journey we’ve traveled here has been informative, and that one or more of the two dozen pots of gold we’ve led you to will prove useful to your deposits strategy. As always, Ken’s posts on the blog will continually lead you to more gold, and when you see one of these all-access credit unions featured, you’ll be more in the know than ever.