It’s the age old question: where do I put my money? I want it somewhere it’ll be safe, but I still want it to grow. But I don’t want to lose any of it. And I don’t have time to manage it. And I want it available when I need it. Which is now.
Historically, we’ve turned to banks for this sort of thing; a nice safe checking account or a money market. Yep, that’s where I’ll go – the local money depository. I know my money will be safe there, and for the safety I’m getting I can’t expect any better return…right?
Maybe not. One often overlooked establishment in the financial sector is the credit union. Credit unions often times have better rates than banks on loans, checking and savings accounts.
But for those of us who are unfamiliar with the concept, let’s run through the basic differences. First of all, who owns it? A bank is owned by shareholders of the bank – investors. The bank, in turn, does what any good corporate citizen does: it tries to make the investors happy.
A credit union, on the other hand, is owned by the members of the credit union, very similar to a mutual company. If you are a member of the credit union, you own part of the credit union. So, in theory, instead of trying to please investors, the credit union is trying to please you.
Since we’re talking about mutual companies vs. stock companies, where do the profits go? In a stock company (the bank), the profits go back to the investors in the form of higher stock prices. In a mutual company (credit unions), the profits go back to the members of the credit union, in the form of lower loan interest rates and higher dividends.
A common misconception is that credit unions are not FDIC insured, and so people are often weary to invest. However, all federal credit unions must be FDIC insured.
Let’s take a look at some local banks here in Milwaukee: US Bank and Wells Fargo. The average interest rate on a savings account is 0.1 percent at US Bank, and 0.05 percent at Wells Fargo. If you wanted to open up a money market at US Bank, their best rate is 1.20 percent; and you need to have $100,000 or more in that account to get that rate (the lowest bracket is 0.25 percent). With Wells Fargo, you can get a 0.15 percent rate, but only if you link that account with another account at Wells Fargo.
Now let’s look at some local credit unions. Landmark Credit Union has a premier checking account with a 7.25 percent rate. Their money market has a 0.3 percent rate; still not great, but better than US Bank and Wells Fargo. Prime Financial Credit Union has a checking account with no minimum balance and a 3.01 percent interest rate. Their lowest money market has a rate of 0.5 percent , the best of any we’ve looked at.
As a disclaimer, please do not accept these rates as set in stone, as rates tend to fluctuate over time. Do not take a copy of the Warrior into the local credit union and expect them to give you these rates. Check with your local financial advisor before making any changes in your portfolio. What you can do, however, is call some banks, call some credit unions and get some quotes. The more information you have, the more intelligent a decision you can make.