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Building a Strong Financial Foundation: How Credit Union Deposit Accounts Can Help

A strong financial foundation brings you peace of mind. If you want to enjoy more financial security, creating a rainy-day fund is the first step. Your savings can serve as a safety net for emergencies and compound your wealth if you invest it wisely. But before you start saving, you need a safe place to store your cash.

A deposit account can protect your savings, facilitate convenient transactions, and even help you earn interest along the way. Whether you work with a bank or credit union, there are many types of deposit accounts you can choose from—with credit union deposit accounts often coming with the best perks.

So, just what is a deposit account?

Let’s break down the different types of deposit accounts and explain how they can enhance your financial wellness.

Understanding Credit Unions and Deposit Accounts

A deposit account is simply a bank account you can use to deposit and withdraw money. You can open a deposit account with a bank or credit union. While banks and credit unions offer many of the same financial services, credit unions stand out from banks in the following ways:

  • Membership – Credit unions have members, as opposed to customers. To become a credit union member, you must meet certain eligibility criteria, such as living locally, belonging to a particular organization, or working for a specific employer. While it may sound like an exclusive club, just about anyone can join a credit union! 
  • Not-for-profit status – As not-for-profit organizations, credit unions reinvest all of their earnings into benefits for their members. As a result, they can afford to offer higher savings rates, lower interest rates, more flexible financing, and more personalized customer service than most traditional banks.

No matter which financial institution you choose, you can rest assured that your deposits will be safe. Federally insured credit union deposits are insured up to $250,000 by the National Credit Union Administration (NCUA), while bank deposit accounts are insured for the same amount by the Federal Deposit Insurance Corporation (FDIC).

Three Common Types of Credit Union Deposit Accounts

As noted above, there are different types of deposit accounts. Each type has its own savings rate and limitations. The main types of deposit accounts are as follows:

  1. Checking accounts – Checking accounts are meant to facilitate daily transactions. Thus, you can withdraw the money you place in your checking account as needed. You can access this money via debit card, check, electronic bank transfer, or ATM. While most checking accounts don’t earn interest, those that do typically have very low annual percentage yields (APYs). 
  2. Savings accounts – Saving accounts are a more lucrative place to store your money long-term. That’s because these deposit accounts pay higher interest rates on your balance. While the average savings account APY is currently 0.42%, you can find some savings accounts that offer APYs of up to 5%. Savings accounts may be more lucrative than checking accounts, but they’re less liquid—some savings accounts only let you withdraw or transfer money six times per month. Some may also require you to maintain a certain savings balance at all times. 
  3. Term share certificates – Also known as certificates of deposit (CDs), term share certificates are deposit accounts that require you to store your money for a set period. The most common term lengths are three months, six months, one year, two years, three years, and five years. To compensate for their limited liquidity, term share certificates offer higher APYs than most savings accounts. The longer the term, the higher the APY. Just keep in mind that you’ll have to pay a fee if you withdraw your money prematurely. These types of accounts are best suited for savings you don’t intend to access anytime soon.

No matter what type of deposit account you choose, you can often enjoy higher savings rates and lower fees when you open it with a credit union. 

Building Emergency Savings with Credit Union Accounts

An emergency fund is money you set aside for emergencies. This money can come in handy if you have to pay for an urgent repair or unexpected bill. By using this money instead of a credit card or loan, you can avoid accruing costly interest.

Here are some steps you can take to build an emergency fund of your own:

  • Open a new savings account
  • Set your savings goal (experts recommend saving three to six months of living expenses)
  • Make some room in your monthly budget 
  • Place this extra money into your emergency savings account each month
  • Consider setting up automatic transfers to stay consistent
  • Monitor your progress

Thanks to credit unions’ superior saving rates, using credit union savings accounts may help you reach your goal faster than those from traditional banks. You can also ask your credit union representative for personalized saving tips.

Achieving Long-Term Financial Goals with Credit Unions

After establishing an emergency fund, you can turn your attention to other financial goals, such as saving up for a down payment for a home, higher education, or retirement. You can reach these savings goals using many of the same strategies discussed above. 

You can also speed up the process by investing your savings strategically. For example, you may want to invest your retirement money in a tax-advantaged Roth IRA or 401(k) account instead of a deposit account. A credit union representative can review your investment options with you and help you select the right account for your goals. 

Credit Unions and Financial Wellness

Reaching your financial goals can be a complex process and you may discover that you need some help along the way. If you become a credit union member, you can enjoy access to the following financial education resources:

  • Budgeting tools
  • Debt management
  • Credit counseling

Credit unions provide these resources because they want their members to thrive financially. Most traditional banks don’t provide this level of customer service.

Find Credit Union Checking Accounts and Saving Accounts With CUSelect

To sum it up, deposit accounts can play a pivotal role on your path to financial security. You simply need to select the right type of deposit account for your goals. And by opening your deposit account with a credit union, you can take advantage of the unique benefits these financial institutions have to offer. 

Ready to find a credit union near you? Compare local credit unions’ rates and eligibility requirements