Interest rates provided by credit unions and banks differ because of the way these organizations are structured.

Banks are for-profit financial institutions owned and operated by shareholders, among whom net profits are eventually distributed. In contrast, credit unions are cooperative bodies collectively owned by their customers - who are referred to as members.  Because of their not-for-profit structure, credit unions can plow back their profits to members in the form of higher interest rates on savings and deposits. For the same reason, they also offer lower interest rates on loans and mortgages than banks.

For instance, the average credit union interest rate on a 5-year, $10,000 certificate of deposit (CD) in December 2022 was 2.33%, according to figures released by the NCUA, or the National Credit Union Administration. The average rate for the same CD offered by a bank was 1.58% at that time. Similarly, a money market account at a credit union gained interest at a rate of 0.40%, compared to 0.31% at a bank.

• Structural advantages: Credit unions can offer higher interest rates than banks because of their cooperative structure. 

• Credit union with the highest interest rate: Great Lakes Credit Union and The Atlantic Federal Credit Union offer the highest interest rate on savings accounts among all credit unions on Raisin.

• How to find credit union savings rates?

• Which credit union has the highest interest rates on savings accounts?

• Benefits of a credit union.

Like all banking institutions, credit unions are bound by interest rate benchmarks set by the US Federal Reserve. This is the primary basis according to which all credit unions set their interest rates. However, factors like the size and assets of the organization, competition with other financial institutions,  and prevalent market forces also influence the decision-making process of individual credit unions. Because of these reasons, the effective interest rate on a savings account offered by any credit union is liable to periodic fluctuations.

You can check the websites of individual credit unions by state and city for information on current rates. For more insights, savings platforms like Raisin can help you with detailed comparisons between interest rates offered by different credit unions. Additionally, the NCUA provides detailed information about average rates at credit unions versus banks.

As of January 2023, the credit union offering the highest annual percentage yield (APY) on Raisin is UNCLE Credit Union. They offer members 5.32% APY on savings accounts with a minimum deposit of $1. Best of all, there are no membership restrictions for accounts opened through Raisin and accounts have no fees.

The founding philosophy behind a credit union is to support communities by providing its members a place to manage their finances at the best possible terms. This makes them distinct from commercial banks, which operate primarily to turn a profit for their owners and shareholders. As a result, credit unions have remained sought after since their introduction in the US early in the 20th century. 

The wide popularity of credit unions is based on the several benefits and privileges they offer their members. Apart from higher interest rates on savings and deposits, these benefits include: 

• Lower fees: For the same reason that credit unions are in a position to offer higher interest rates on savings and deposits, they can also offer substantially lower fees, penalties, and other charges. For instance, it's normal for banks to require a minimum daily balance of at least a couple of hundred dollars in a savings account, failing which customers will have to pay a penalty. However, the minimum balance for a credit union savings account can be as low as $0.01.   

• Lenient credit qualifications: Because of their cooperative and community-focused outlook, credit unions can potentially much more accommodating of people with either bad credit history or no credit history. 

• Personalized service: Because of their smaller size, credit unions can be friendlier in their approach to customer service and support. This can be reinforced by the fact that credit union customers are actually shareowners.

Have you decided to move your savings to a credit union but don’t know which one to sign up for? Raisin is the perfect place to refine your search for the credit union that best suits your needs.

We are a financial products and services marketplace that exclusively partners with federally insured credit unions and banks. Raisin offers you the opportunity to open savings and deposit accounts with multiple banking partners, all from the convenience of a single log-in.

Sign up to Raisin today to begin your credit union savings journey!