Remember the days of pedaling to the local bank and depositing your lawn-mowing or paper-route money into a savings account?
Life is more complicated now (as are our finances), but the idea remains the same: We want a safe place to store our money and, ideally, watch it grow.
SELCO has been around since the throes of the Great Depression, providing continual service without interruption. Helping our members through the good times and bad is our reason for existing. And, really, there’s no safer place to keep your money than with a federally insured credit union. Not only are your SELCO accounts fully insured by the National Credit Union Share Insurance Fund up to $250,000, our regulatory examiners rate SELCO among the strongest credit unions in the Pacific Northwest.
There are multiple ways to save with SELCO, and no two savings accounts are alike. Read on as we explore the features of the most common savings options, and the subtle differences among them at different institutions.
Traditional savings: Straightforward, safe
A traditional savings account is likely one of the first accounts you’ll have. Savings accounts are uncomplicated, taking little effort or money to set up and maintain. As mentioned above, they’re federally insured for up to $250,000.
- Minimum balance: Most institutions require only a small deposit—$5 at SELCO—to open a savings account. But be sure to read the fine print. If your balance dips below a certain amount, you might be hit with a service charge.
- Interest rates: A common requirement is that you must maintain a certain balance to earn the dividend. According to the National Credit Union Administration’s Q4 2022 report, average interest rates for savings accounts with a minimum balance of $2,500 are at 0.14% for credit unions and 0.22% for banks. Many institutions are taking advantage of the Fed's elevated interest rate by offering dividends much greater than the national average.
- Withdrawal rules: Some institutions may enforce the Federal Reserve Board’s Regulation D (Reg D), which sets a limit of six withdrawals or transfers per month. Anything past that could result in a fee, or your account being closed or converted to a checking account. (At SELCO, traditional savings is considered a "transactional account" and therefore doesn't fall under the regulation and allows unlimited withdrawals.)
CDs: Set 'em and forget 'em
A certificate of deposit (more commonly referred to as a CD, or a certificate at credit unions) is a way to invest a specified amount of money for a specified period of time at a specified interest rate. CDs offer a hassle-free way to set and forget your funds and watch them grow.
- Minimum balance: Unless you opt for a jumbo CD—$100,000 or more—you won’t need a pile of money. Most institutions require a minimum deposit of $1,000 to $2,000. (A $500 minimum balance will get you started at SELCO.)
- Interest rates: The longer the term, the higher the interest earned. In the recent NCUA rates report, the average return on a two-year CD with a $10,000 minimum balance is 1.92% for credit unions and 1.40% for banks. For a five-year CD with the same requirement, the rates are 2.33% and 1.58%, respectively. Of the four savings options in this article, CDs consistently offer the highest returns. The national average interest rate is coming in under 2% for most CD terms. Similar to special promotions for traditional savings accounts, many institutions are currently offering much higher dividends, including SELCO.
- Withdrawal rules: If you need to withdraw money before the maturity date, the penalty is typically several months’ worth of accrued interest. So, depending on when the withdrawal is made, your investment will still likely get a boost.
Money Market: Best of both worlds
A money market account (MMA) is a mix of savings and checking that builds on your investment while allowing you access to your money.
- Minimum balance: MMAs typically require a minimum deposit of between $500 and $2,500 ($1,000 at SELCO). Again, check the fine print to see if there are penalties or fees if you dip below that balance. (There is no penalty at SELCO if your balance falls below $1,000.)
- Interest rates: Similar to other savings accounts, MMA interest rates are tiered based on the investment amount. According to the NCUA quarterly data, the average APY for an MMA with a minimum balance of $2,500 is 0.40% for credit unions and 0.31% for banks. At some institutions, that can jump significantly with a larger balance.
- Withdrawal rules: The standard—but not the rule—is a limit of six withdrawals per month, but some institutions offer unlimited transactions.
Health Savings Account: A nod to your future health
A Health Savings Account (HSA) is a tax-free way to set aside money to pay for or reimburse current or future medical expenses. You can only deposit funds into these accounts while you’re enrolled in a qualified high-deductible health insurance plan. Visit IRS.gov for details.
- Minimum balance: Most institutions—including SELCO—won’t require a minimum deposit to get started. Some require a small balance at the outset, while others want you to maintain a certain balance to earn a dividend or avoid fees.
- Interest rates: The range of HSA returns is broad, with some institutions even offering no interest at all. Often, rates increase incrementally as your balance grows.
- Withdrawal rules: There’s no limit to the number of withdrawals, but the money is earmarked for medical expenses only. Until you hit age 65 or become eligible for Medicare, there are stiff penalties for withdrawing for non-medical expenses.
Keep the big picture in plain view
As you can see, savings accounts come in all shapes and sizes. One thing to always keep in mind is what’s in the fine print. Big banks commonly charge monthly fees and impose requirements and restrictions for even the most basic savings accounts. Credit unions, on the other hand, rarely—if ever—do the same. So, when it’s time to make a decision about what to do with your nest egg, it’s wise to look broadly and carefully before tucking it away for safe keeping.