EL SEGUNDO, Calif. — Though credit unions traditionally have offered better rates on savings accounts than banks, until recently CUs have not made much noise in the online marketplace.
But that may be changing.
According to recent analysis by GoBankingRates.com provided exclusively to Credit Union Journal, some CUs are stepping into the Internet realm usually populated by online-only banks such as Ally and the former ING Direct (now part of Capital One).
"Credit union rates for online accounts are competitive," said Casey Bond, managing editor at GoBankingRates. "The latest averages for regular savings accounts are 0.14% at credit unions and just 0.09% at banks.
The list of the top 10 annual percentage yields for online savings accounts by credit unions was led by an eye-popping 5.5% offered by $271 million Navigator Credit Union, Pascagoula, Miss., on its "Save 'N Up Savings" account.
The account has a maximum balance of $300, and requires members to have a checking account with a debit card. When a debit card is used for purchases the "change" is rounded up to the nearest dollar and is deposited into the savings account.
In second place is Next eSavings from $192 million Northern FCU in Watertown, N.Y., with a 5.0% account that only requires account holders to have a Next eChecking account and receive e-statements. Maximum balance is $500.
"Centsible Savings" from $600 million Alabama Telco CU, Birmingham, Ala., is another account fed by debit card purchases. Holders can earn 3.0% interest if they have both a checking and savings account with the credit union, plus a debit card.
Debit card purchases are rounded up to the next dollar and deposited into the account. For the first 30 days — if the holder has e-statements — the CU will match 25% of the balance deposited. After 30 days, Alabama Telco will match 5%. The 3.0% APY is earned only on balances transferred over.
The $5.4 billion-asset Bethpage FCU, Bethpage, N.Y., offers a 3.0% rate on its Youth Savings account for members up to age 21, maximum balance $999.
Utah Power CU, a $502 million credit union in Salt Lake City, has a Regular Share account with a $1.0% rate with a minimum deposit of $5.
In Jacksonville, Fla., $125 million Coastline FCU offers a Kasasa Saver account with a rate range from 0.25% to 0.75% on balances up to $4,999. The account holder must have a Kasasa Cash account, direct deposit and receive e-statements, and must make 12 debit card purchases. If conditions are not met the rate drops to 0.01%.
(Kasasa accounts are offered by many financial institutions, but rates vary.)
Rounding out the top 10 are $26 billion State Employees' CU, Raleigh, N.C., (0.75% on share savings); a Texas branch of $8.1 billion Alliant CU, Chicago (0.70% on share savings); $6 million Star One CU, Sunnyvale, Calif., (0.65% on special savings); and, $90 million MAC FCU, Fort Wainwright, Alaska, (0.50% on regular share, maximum deposit $9,999).
'Good Mix'
Bond noted that the top 10 represents a "good mix" of accounts.
"Our research has consistently found that credit unions are highly competitive on their regular savings accounts, which speaks to the goal of a credit union rather than a bank," she said. "Because credit unions operate to get money back to their members rather than banks, which operate to make a profit."
In recent years CUs have become "more competitive" when it comes to technology, with many offering online versions of their regular services, according to Bond.
"The average credit union member is different than someone who would opt for an online bank such as Ally," she noted. "Online banks are about delivering core products easily and quickly, but there is not a lot of personal service. You cannot walk in and talk to a personal banker. Credit unions are offering online versions of products so people can enjoy the benefits of a credit union — walking in to a physical location and being on a first name basis with the staff — but then having a good rate on savings."
Bond said top rates on online savings accounts offered by banks — other than promotional rates — currently are 0.85% to 0.90%. She said these are "really small numbers" because deposit rates are low everywhere right now.
"I am not too optimistic about deposit rates rising in the next couple years," she added. "Rising rates will be for long-term rates. The Fed has said it will not raise the Fed Funds Target Rate until we see a significant decline in unemployment to below 6.5%. The consensus is banks are anticipating making a better spread on deposits vs. loans this year and next."
