Many credit union members who are looking for low-risk investments opt for certificates of deposit, or CDs. A CD is a savings certificate entitling the bearer to receive interest; it bears a maturity date, a specified fixed interest rate and can be issued in any denomination by a financial institution. What makes a CD a wise investment tool is that, unlike a regular deposit account, it typically offers a higher interest rate.
Credit unions often offer many of the best interest rates on CDs, giving members a secure option for money they want to invest. Even in these uncertain economic times, a credit union CD can provide temporary certainty that rates will remain consistent at least until your CD matures.
Credit Unions Offer a Variety of CD Options
Not only do credit unions offer superior rates on their CDs, they also provide a variety of options depending on a member’s investment needs and financial goals. Although the best rates can often be found with a long-term CD, your credit union may be offering a CD product that’s better suited to what you’re looking to accomplish in the short term.
“Traditional” CDs, or those paying only a fixed interest rate, have historically been and still are the most popular type. Nowadays, however, credit unions are offering CDs with more non-traditional features including those with little or no penalty for early withdrawals, with special redemption features in the event of death, or those known as index-linked, structured, equity-linked, and more. Many credit unions are also offering relationship certificate rates in which a member can take advantage of higher CD rates if they have certain relationships with the credit union or have accumulated a certain number of points for those relationships.
Gulf Coast Educators Federal Credit Union’s (Pasadena, TX) standard CD features a $1,000 minimum with terms from 90 days to 5 years. In addition, the credit union offers one specialty term share known as the College Saver. According to Jamieson Mackay, Vice President, there is a $250 minimum required opening deposit and the young member must have a parent/legal guardian joint owner. The account also features an unlimited number of deposits in amounts greater than $50, the member must join the Sandy Saver or Teen Club (be of 17 years of age or younger), and the Term Share will renew automatically every 12-months until the member reaches 18 years of age.
“We also have a relationship pricing bonus of .50 on our Premium Deposit Accounts – this account is designed to reward members who use several credit union services by adding one half a percent to the annual percentage rate of any new Term Share Account opened,” explains Mackay. Members who use three of the following Gulf Coast Educators FCU services will qualify for the 1/2% bonus of the Premium Deposit Account: Checking Account, Direct Deposit, Loans, IRA, VISA Check Card, and Billpay. “We recommend term share accounts to members who are most rate-conscious and our rates tend to be among the highest in the area, especially with the .50 PDA bonus,” contends Mackay. Gulf Coast Educators FCU members must be taking their credit union’s advice because term shares account for almost a third of their member deposits.
Although some financial institutions have paid less attention to deposits in today’s economic climate, Gulf Coast Educators FCU has maintained their CD options for members who want to save and invest. “As lending decreased during the recession, we continued to make a commitment to our members who are savers with higher than average rates in our area,” says Mackay. “That balance between savings rates and loan rates is becoming increasingly difficult to manage but the credit union's relationship with its members is a key consideration for our team.”
According to Justin Mager, Regional Manager at Veridian Credit Union (Waterloo, IA), his credit union offers several specialty CDs. Some include:
Add-On CD – this CD only requires a minimum deposit of $500 and allows members to add to it as often as they would like within its 12-month term.
Bump Up CD - with just a $1,000 minimum deposit, members can bump their interest rate up to the current Bump-Up rate one time during the 30-month term. “Members find this to be a nice option,” says Mager.
Starter CD – this CD allows members to reach their savings goals gradually by starting small, depositing the minimum $50 and adding to their balance as often as they want within its 12-month term. “This is a great option for parents putting money aside for their children’s future,” explains Mager.
HSA CD – this is available to Health Savings Account holders and requires a $1,000 minimum deposit. With an HSA CD, members have the option to choose from any of the credit union’s CD terms, with the exception of their $500 Add-On certificate.
Kirby Kangaroo Kids Club CD – this youth-geared CD only requires a minimum deposit of $100 for a 12-month term or greater, up to 60-months.
Veridian’s newest certificate is their Starter CD, which is a good option for parents or really anyone that wants to save money and earn a little higher rate than a regular savings account. Mager says that CDs are a way for members to earn a higher rate of return on funds they may not be using in the short term. “With many term options, members can choose from terms as short as one month or as long as 60 months, depending on when they will need the funds.”
With any of Veridian’s CDs, members can choose to reinvest and compound the interest earned into the CD balance or they can choose to receive the dividends in a check or deposit to their account. “Veridian’s mission is to partner with its members to create successful financial futures - by offering multiple CDs, we are able to assist a broad range of members with their financial goals,” contends Mager.
If you want to know that your money is secure and earn above-market yield at a fixed rate, maybe a credit union CD is the option for you. Call your credit union or check out their website for term share certificate details or to open one. Not a credit union member? Find a local credit union and join today!