Traditional savings accounts pay a limited amount of interest. One of the key differences between credit unions and banks is that credit unions pay dividends to their members. These dividends are typically higher than what a bank would pay and can provide benefits that go beyond what you would find at a bank.
Leaders Credit Union offers high-yield savings accounts to members, including accounts that reward saving with tiered dividends as well as accounts that pay generous dividends for high balances. We believe that putting money into a high-yield account can be useful for a variety of reasons. Here are some suggestions about how to use a credit union high-yield savings account.
Credit unions and banks have a lot in common, but they are not the same. The primary difference is that banks operate on a for-profit basis, and their goal is to earn money for their shareholders. Credit unions are not-for-profit organizations and any financial gains are passed on to members in the form of dividends and affordable rates and fees.
With a credit union savings account, you can earn a far higher return on your savings than you would with a regular savings account. The average annual percentage yield (APY) for a bank savings account sits at 0.46% as of June, 2024.
By contrast, credit union savings accounts pay dividends at rates that are significantly higher than banks. For example, the Forward Plus High Yield Savings account at Leaders Credit Union is paying a great rate of APY.
It’s important to note that credit unions are fully insured, but not by the FDIC as banks are, rather, by the National Credit Union Administration (NCUA) via the National Credit Union Insurance Fund (NCUIF). Deposits in credit union accounts are insured up to $250,000 per member.
Credit union savings accounts typically span a wide range of options and include accounts that are ideal for a variety of purposes. Here are some examples of savings accounts that you can find at Leaders Credit Union:
As you can see, it’s possible to earn dividends that are significantly higher than what you would find at a typical bank.
A high-yield savings account is an account that pays a high APY to encourage savings and reward credit union members who save their money. In many cases, the dividends on a high-yield account are significantly higher than they would be for a typical bank savings account.
One of the things that distinguishes a high-yield savings account from a traditional savings account is that there is often a minimum account balance required to earn dividends. Dividends may also be tiered to reward people with the most savings. However, our Forward Plus High-Yield Savings Account pays a flat APY with no balance tiers and no requirements.
A high-yield savings account provides a way to earn more on your money than you would with a traditional savings account while still maintaining liquidity. Most institutions allow a limited number of withdrawals or transfers each month without fees.
There are many advantages to choosing a high yield savings account, but it’s important to note that it’s not ideal for every situation. Here are three ways to use your high-yield account to take advantage of your earnings.
Most financial experts recommend that people have at least six months’ worth of expenses saved in the event that they lose a job or experience some other form of financial hardship. A high-yield savings account is a good place to keep your emergency savings.
When you deposit your emergency savings in an account that pays a high APY, you can watch your money grow while still keeping it accessible.
Many of our Leaders Credit Union members use a high-yield account to save for a short-term savings goal. As we noted above, we offer an APY that’s more than three times the national average for our Christmas Club and Vacation Club savings accounts.
People also use high-yield accounts to save to buy a new car or for desired home improvements where they prefer to pay out of pocket instead of obtaining financing. If you know you’ll be making a large purchase in the next one to two years, then a high-yield savings account can help you prepare.
People who are planning to buy a house may choose to use a high-yield savings account to save their down payment. Putting it in a personal savings account offers guaranteed returns, which would not be the case if that money were invested.
You can take advantage of compound interest and potentially, save on your interest rate and mortgage, by making a large down payment when you buy a house.
We’ve talked about the ideal uses for a credit union high-yield savings account, but we think it’s important to note that a high-yield account isn’t ideal for every purpose. Here are some situations where we would recommend against using a high-yield account.
If you’re saving for a long-term expense – for example, saving for a child’s college education – then a high-yield savings account is not the best option. There are tax-free savings accounts, such as a Coverdell Education Savings Account or a 529 plan, that are better suited for long-term savings and offer tax advantages that a high-yield savings account does not.
The same downsides that apply to using a high-yield savings account for college accounts apply to retirement, too. While you will earn a higher-than-average APY on your savings, you will not earn as much as you would with an investment account. There are also tax advantages that come with choosing an IRA or another tax-deferred retirement plan that are not available with a high-yield savings account.
If you decide to open a high-yield credit union savings account, here are some pointers to help you make the most of it.
Used properly, a credit union high-yield savings account can be the best vehicle to maximize your savings while still having easy access to your money when you need it.
Whether you already have an emergency savings fund or you want to start one, a high-yield savings account can help you take advantage of compound interest. The tips we’ve included here will help you make the most of your account.
Are you in search of a high-yield account that pays generous dividends? Leaders Credit Union is here to help! Learn more about the Forward Plus High Yield Savings account and open yours today.
If you still don't know where to start, download our free Beginner's Guide to Establishing Savings.