Your local credit union is a not-for-profit financial institution that’s owned and operated by its members. This means that a credit union exists to serve its members’ best financial interests.
Oftentimes credit unions are established among members who share a common bond such as place of employment, education, social interest, location, or even religious beliefs. Let’s discuss the various account types you can open with your credit union.
The Roles of Your Credit Union
Credit unions are becoming increasingly popular in the financial landscape. Furthermore, a credit union serves three main roles. The first is to encourage its members to save regularly through avenues like payroll deduction and direct deposit. Secondly, a credit union allows members to borrow funds at affordable rates of interest. Finally, once all expenses are paid and reserves are set aside, then the surplus earnings are given back to its members as higher dividends, lower interest rates, or more cost-effective services.
Account Types You Can Open With Your Credit Union
Various accounts exist to meet different needs. Therefore, your financial goals will determine which accounts will best serve your purposes. These accounts will help you to regulate your spending and saving, maximize the return on your savings, minimize your fees, and optimize your money management.
Here are the most common account types you can open with your credit union:
- Savings accounts
- Checking accounts (including interest checking)
- Money market accounts
- Certificates of deposit (CDs)
- Retirement accounts
Savings accounts are the most common bank accounts that most people first acquire. At Riegelwood Federal Credit Union, it’s possible to open savings accounts for children and teens. These accounts are quite useful to teach youth about good money management practices and to get them started on the journey to financial success.
A savings account is a great place for your emergency fund. Opening a savings account will also mark the beginning of your relationship with your credit union, as you instantly become a member. Money in your savings account represents your shares or part ownership of the credit union.
Savings accounts are best suited as the initial bank accounts for children, teens, and adults, and as a place to safely store extra cash. However, savings accounts do not attract high interest rates (in comparison to money market accounts) so you will not get high returns.
Tips for Savings Accounts
- We recommend online savings accounts because they often pay the most interest and charge the lowest fees.
- Build up your savings account with a lump sum of cash. Alternately, you can set up automatic monthly deposits to ensure that you’re saving regularly.
Checking accounts are used to deposit checks, make withdrawals, and facilitate bill payments. Although there is a decline in the use of paper checks, they are the distinguishing feature of this type of account. Recently, the debit card (or check card) has become the more dominant form of payment from checking accounts. Most financial institutions now offer online bill payment solutions via their checking accounts – which helps with ease of payment.
A checking account is best used to deposit paychecks and cash, as well as to make payments. These accounts are also ideal for those who keep small account balances and enjoy the convenience of paying via check card. However, checking accounts attract a lot of fees, which can be expensive. The good news is that many checking accounts also allow you to avoid maintenance fees and minimum balance restrictions.
Tips for Checking Accounts
- Always balance your checking account every month. This aids your money management, helps you avoid fees, and allows you to find and resolve any fraud or errors in time.
- Establish a direct deposit of your wages into your checking account. This will allow you to get fast access to your funds and eliminates a trip to the bank or ATM.
- It may be safer to use a credit card for daily transactions to avoid the fallout from any errors or fraud. However, be sure to pay off the balance on that credit card each month to avoid debt accumulation.
Money Market Accounts
Money market accounts earn more interest than either a savings or a checking account. You can think of a money market account as a combination of the features of both types of accounts. A money market account is your best option if you normally carry a high balance in your checking account. By using a money market account, you will also get a higher interest rate.
A money market account is advantageous for those who have $5000 or more in their accounts and who desire higher interest rates. However, some money market accounts have high minimum balance requirements (from $5000 to $10,000), so it can be difficult to maintain a high rate of return and to avoid heavy fees. You’ll also need to monitor your account as withdrawals are often limited to three or six per month.
Tips for Money Market Accounts
- Money market accounts are ideal for saving larger emergency funds. Although you won’t have ready access to the funds, it will be there when you need it.
- Check your local credit union to explore the money market options and begin to increase your financial resources.
Certificate of Deposit (CD) Accounts
A CD account offers a high rate of return, but the catch is that you have to commit your money in that account for a fixed period. For example, this term can be for six months, a year, or 18 months. So this means you will have to keep your funds locked away for a set time.
The advantage of using a CD account is that you earn a high return while the money is locked away. However, if you withdraw your funds too early, you’ll need to pay a penalty. This penalty may also wipe out your interest and even part of your initial deposit. Financial institutions often refuse to allow early withdrawals from these accounts.
Tips for CD Accounts
- You can set up a basic CD ladder that will make some of your savings available periodically.
- You can also explore flexible CD accounts that will allow you to withdraw money early and without penalty.
Retirement accounts offer attractive tax advantages. With savings and CD accounts you avoid paying income tax on interest earnings, but you’ll have to pay taxes on those earnings at a later date. Some of these retirement accounts offer tax shelter either at the point where you put money in, or when you take money out. Most financial institutions offer IRAs (traditional IRAs and Roth IRAs), and they may also provide retirement accounts for small businesses.
A retirement account is a good way to save for your financial future. Retirement accounts make it easier to save money and accumulate large account balances in the long-term. However, any tax benefit that you access will also have conditions. So be sure to read and understand the eligibility rules for these account options.
Tips for Retirement Accounts
- Planning for your retirement requires long-term strategies. We recommend that you speak with your financial adviser to make the right choice of retirement accounts. They will advise you about how much you’ll need for retirement and how you should allocate your retirement portfolio.
- If your company offers a matching plan, such as a 401(k), then be sure to max that out first. You don’t want to leave “free money” on the table! Then you can start putting money into a retirement account with your local credit union.
Visit Riegelwood Federal Credit Union to Set Up an Account Today
You should now be clear about the various account types you can open with your credit union. Contact us at Riegelwood Federal Credit Union to explore our impressive suite of accounts that are designed to help you achieve financial independence and security for you and your family. Let us help you with your saving and investment journey today for a brighter future tomorrow.