There are numerous deals available to earn good rates on deposit accounts – even in this low-rate environment. But, you will need to do your homework. Here are some tips. Understand the restrictions. Credit unions often have membership requirements, while local banks often cater to the community. Pay attention to maturities. With rates this low, you have to be cautious about locking-up your funds for longer than you intended just to get a better rate. Take advantage of competition. If other financial institutions in your area offer higher rates than your bank or credit union, you might be able to negotiate a better deal with the institution that has your business. Keep an eye on early withdrawal penalties. For longer-term CDs, stick to institutions where the early withdrawal penalty is equal to no more than 90 days interest Consider splitting money into the smallest increments that can earn the best returns. That way if you need money suddenly and you need to break a CD, you might only have break one minimizing any early withdrawal penalties. Consider multiple relationships. Some banks and credit unions reserve the best deals for customers who use them for more than just a savings account.
Students who have high hopes of attending a college or university but severely lack adequate funding may be eligible for special subsidized federal loans. With a subsidized loan you do not have to pay the interest on the loan while you are in school. And, a new law recently signed will continue to make student loans affordable. For the next year, college students are assured that federal subsidized loan interest rates will stay at 3.4%. The White House estimates that will save more than 7 million students about $1,000 each. Under the new law, students forfeit the six-month repayment grace period and will have to start repaying their loans as soon as they leave school. Graduate student will have to pay interest on their loans while they are in school.
Credit unions have been around for quite a while, but it hasn’t been until the last few years, after people have grown wise to the excesses of the “too big to fail” commercial banks, that they’ve really grown in popularity. So, why should you do business with a credit union instead of a bank? Here are some compelling reasons:
Credit unions are smaller, which usually means better service. The fewer customers you have, the less likely each customer becomes an account number. When you get to a certain size, everything gets boiled down into a spreadsheet line item and you lose a bit of the human touch. Credit unions are usually much smaller, more localized, and so you get more personalized service.
Better rates. You can usually find some of the best savings and the best car loan rates at a credit union. Banks make their money by borrowing it for cheap (from deposit accounts like CDs) and lending it out for more (like on mortgage and car loans). Credit unions don’t have as much pressure to do that because the customers, the ones depositing and borrowing money, are the beneficiaries of any profits.
Fees and minimum balances are generally lower. Most credit unions have share draft accounts with very low minimums and low, if any, maintenance fees. Again, without a strong profit motive, certainly not as strong as the publicly traded commercial banks, there’s little incentive to entice people to deposit more to increase loan amounts.
NCUA insurance is as strong as FDIC insurance. If you’re concerned that your funds may not be insured, don’t be. The National Credit Union Administration (NCUA) insures your deposits to the same level as the FDIC. Your funds are just as secure.