Question for the Money Doctors
Question submitted on Jul 27, 2012.
QuestionIs it better to have a checking and savings account at a credit union because they have a better interest rate
There are many factors to consider when you decide on where to open a checking and savings account. The interest rate paid on the accounts is one factor, but you also need to consider the following:
1. Is the interest rate offered to you a promotional rate? Sometimes a financial institution may entice you to sign up with them by offering a really good interest rate. This may be for only a limited amount of time or for only a small portion of your balance.
For example there is a local credit union that is offering 2.5% on their checking account, but you have to have a direct deposit of your paycheck in the account, use their debit card and maintain a minimum balance of $2,500. The 2.5% rate only applies on the first $2,500 and anything about that is .1%.
2. Does this financial institution have convenient ATMS for you to use with no service charge?
3. What are the minimum balances and service charges?
4. Do they offer competitive rates for car loans, home loans, and credit cards? Having an account at the financial institution may help.
5. Are they insured? Banks have FDIC insurance and credit unions are insured through NCUA. Check with the institution about insurance on your money.
6. Credit unions tend to have membership requirements. Check to see if you qualify to be a member.
Banks and credit unions are regulated differently. Banks are generally for profit corporations that are chartered under the federal or state governments and owned by shareholders. Banks are generally have access to the Federal Reserve. Credit unions are generally non-profit organizations that are owned by the members. Both banks and credit unions have Boards of Directors and work under strict regulatory oversight.
Learn more about the financial institutions before you do business with them.
For additional information visit http://www.360financialliteracy.org/