For Top Rates, Can Credit Unions Compete?
One of the things we’re proud of at DepositAccounts is how our patented rate-tracking technology isn’t built to monitor only banks, whose products dominate the coverage by most sites that list deposit rates. In the data universe we opted to create, more than 4,000 credit unions also populate our rate tables. Ranging from those with over a hundred thousand members and nationwide availability to tiny ones with a single branch and a mere one hundred members, credit unions play a fully co-starring role alongside banks on our stage of national, regional and local deposit rates.
Of course, our decision to track thousands of credit unions only goes so far in explaining why they appear on our site with any prominence. The other reason is simply that credit unions are typically among the most rate-competitive institutions a saver can access. Indeed, overlooking credit unions in your deposit portfolio would mean regularly missing out on a top available yield.
But exactly how often do credit unions give the very best-paying banks a run for their money? Are they a bit player once you enter the upper echelon of rates and the world of internet-only banks, or are they something more?
Since our rate search pages can provide a quick ranking of APYs for any deposit product at any point in time, we decided to run some tests to quantify exactly how competitive credit unions can be among the top-shelf national rates. And here's what we found.
A simple setup
We chose 10 standard deposit products to include in our analysis: four liquid accounts (personal savings, money market, standard checking, and rewards checking) and six different CD terms. We also decided to focus our lens exclusively on nationally available products, meaning banks and credit unions that accept deposits from customers living anywhere in the country and require no limiting membership terms.
We then searched our rate databases for these 10 products using a balance amount of $25,000, except for the two checking accounts, where we assumed a $5,000 balance. We pulled rate results on Monday, June 12, and included the ten best rates for each deposit product in our dataset.
Note that this means our data represents a snapshot in time, and our results wouldn't necessarily be precisely replicated in a future test. But since there's no reason to expect the current rate landscape is substantially different right at this moment than it would be at other times, we assume our findings are representative within a reasonable margin.
Tallying the credit union appearances
Starting with the four liquid account types, we quickly discovered that banks entirely dominate credit unions among the best-paying savings, money market, and standard checking accounts. In fact, among all the Top 10 rates for these three account types, credit unions offered only two of the top 30 rates.
Meanwhile, though, the script flips for rewards checking, where credit unions outnumber banks 4:1.
The competition heats up when we shift to certificates of deposit. Here, credit unions put up a respectable fight in several CD terms. Although they don't dominate any of the CD rankings, they are just as likely as a bank to offer a Top 10 rate for longer-term CDs, like 4- and 5-year certificates. And for every CD category we tested, credit unions appear at least twice in the Top 10.
We did one additional analysis on CD rates from credit unions versus banks, checking whether their competitiveness changed for IRA CDs. But across three terms we checked (1-, 3- and 5-year maturities), the number of credit unions in the Top 10 rates was exactly the same for standard and IRA certificates.
Below we’ve pulled all our findings together, and arranged the list not by product but by competitiveness of credit unions for each deposit type. This sorting highlights that rewards checking truly is the anomaly, where banks hardly make any inroads. All the other liquid accounts, meanwhile, appear at the opposite end of the spectrum, with credit unions playing a negligible (or non-existent) part in the Top 10 mix.
As a last crunching of the numbers, we gathered the Top 10 rates for all 10 products into a collective group of 100 rates. Taken as a whole, almost a third (31 percent) were offered by credit unions. Drilling down then on the 69 top rates offered by banks, we found that almost half of the top products (49 percent) came from internet-only banks.
Drawing the obvious conclusion
Savers who overlook credit unions – or don’t understand their sometimes-wide availability – do so at their own return-on-investment peril. While internet banks are a difficult horse to beat in the rates race, nationally available credit unions still manage to pull ahead 3 out of 10 times. And they outnumber physical banks 3:2 among the Top 100 rates.
The case for paying credit unions the attention they deserve is further strengthened when you include restricted credit unions. Though they aren't available to savers nationwide, they may be open to you, depending on your residency, current or former employer, or affiliation, such as a military background. And several credit unions with membership requirements would rival the Top 10 rates we looked at here. So in addition to shopping the national "easy access" credit unions, be sure to also shop locally, which you can easily do by indicating your city and state when you use our rate search tables.
I've yet to see a persuasive counter-argument to the ABA's position.
Lest you think I am dumping on PenFed, I'm not. It's any "easy to join" credit union, found here on Ken's blog. My whole point was the tax advantage for credit unions. It is not fair for a bank to masquerade as a credit union. Period.
The ABA doesn't like completion. They want it ALL. "To big to Fail"
For example, let's assume the local juice bar in town offered tax-free slurpies, because the State decided the beverages were from a credit union. Down the road, a local vendor of the exact same drink had to pay state sales tax.
Would that be fair?
goodbye. Bye the way, several years ago, USAA tightened requirements to become a member.
USAA floods the airwaves with its ads. PenFed floods the print media with its ads. Each offers basically the same array of products. Each is (theoretically) a non-profit. Each has members, but no shareholders. One is a bank (USAA Federal Savings Bank) and the other a credit union (PenFed).
My casual understanding of Federal and State tax law is that banks are taxed on profits. Credit unions are not, since, by definition, they must be "non-profit". Query: who defines "profit" for a credit union?
If you don't have a clue how to join PenFed, and seem put off by USAA, I'll bet your great-great-great granddaddy served either with U.S. Grant or Robert E. Lee.
You thus qualify for membership in Navy Federal.
That having been said, I doubt that any tax reform package (assuming we ever get one) will address the issue.
And, after jumping through all those incredibly-simple hoops, you are rewarded with a seven-year CD rate barely above 2%.
That said, their e-mail solicitations are fairly amusing.
I mean, how many years did it take for Congress to wake up to the "spousal benefit" loophole? It was only after folks on social media began calling the loophole "free money", costing the SSA many millions of dollars each year, that Congress awakened.
There was never any justification for the loophole. It was just a legislative freak of nature.
Meanwhile, the spouse would continue to amass DRCs (delayed retirement credits) on his or her own account.
This spousal benefit totally upended the concept of age-neutrality, but was totally legal.
My wife collected for four years under the old law. She is now collecting under her own record.
Two simple rules: (1) old folks vote; (2) old folks hate change.
It's good enough for the top office of the United States, it should be mandatory for ALL elected politicians.
Then why does this website show that credit unions currently have the highest rates for 1,2,3,4 and 5 year CD's?
Lies, ****ed lies - and, statistics.
Now, if you really wanted to have fun, you'd depose the folks at BLS. They are the masters at cherry-picking data.
"How to Lie with Statistics" was required reading in my Stat 1 course at Stanford. Of all the courses I took at LSJU, that course made a huge impression.
Yes, it's still on Amazon (and getting rave reviews to this day). For anyone who finds math books totally dull and boring (as do I), "How to Lie With Statistics" is about as good as it gets.
"We also decided to focus our lens exclusively on nationally available products, meaning banks and credit unions that accept deposits from customers living anywhere in the country and require no limiting membership terms."