NEW YORK -- When searching for the best rates on deposits and loans, credit unions are likely to beat those of the neighborhood bank, Money Magazine said on CNNMoney's Web site.
In a Sept. 12 posting, a reader wrote in asking why the magazine doesn't list rates for certificates of deposits at credit unions. The writer wondered "[is] it because account insurance from credit unions isn't as reliable as insurance you'd get from a bank?"
In response, George Mannes, Money Magazine senior writer, wrote "To make Money Magazine's Savings and Credit listings, a bank must be willing to sell CDs to anybody. But credit unions - member-owned, nonprofit institutions chartered by a state or the federal government - limit their membership to certain populations."
Mannes went on to write some credit unions serve people who live or work in a particular area, "such as Mission Fed in San Diego...Others, like Navy Federal, focus on employees of a particular institution and their families" and suggested going to CUNA's Web site to find a credit union listing.
"In any case, insurance on credit union CDs and other deposits is as good as or better than what you'd get through the FDIC. And credit unions often beat your neighborhood bank on the rates they pay on deposits (or charge for loans)," Mannes wrote.
The average recent annual percentage yield on a one-year CD from large credit unions was 4.98%, according to Bankrate.com, Mannes wrote, compared with 3.35% for big banks in major markets. "That's quite a difference," he pointed out.