Credit unions do offer high yield savings accounts, but the term means something different than it does at online banks
A credit union savings account that pays a competitive rate exists, but it is usually called a "share savings account" or "money market account" rather than a high yield savings account. The difference matters because credit unions are member-owned cooperatives, not banks, so they use different language and structure their products differently. What you are looking for—a savings account that pays more than the standard passbook rate—is available at most credit unions, though the rate and the account type vary by institution.
The rate you will see at a credit union is typically lower than what the largest online banks advertise, but higher than what traditional brick-and-mortar banks offer. A credit union might pay 4.00% to 5.00% APY on a share savings account, while an online bank might pay 4.50% to 5.35%. The difference exists because credit unions have smaller deposit bases and lower overhead than national online banks, which means they cannot always match the highest rates. Your actual rate depends entirely on which credit union you join—there is no single credit union rate.
Key Takeaways
- Credit unions call high yield savings accounts "share savings accounts" or "money market accounts," and the rates vary by credit union rather than being standardized across the industry.
- Credit union rates are typically 0.25% to 0.75% lower than the highest online bank rates, but higher than traditional bank rates.
- You must be a member of the credit union to open an account, which usually requires living or working in a specific area or belonging to a may have access to group.
- Credit union accounts are insured by the National Credit Union Administration (NCUA) up to $250,000, the same protection that bank deposits receive from the FDIC.
- Some credit unions offer tiered rates that increase as your balance grows, while others offer a single rate regardless of balance size.
How credit union membership works and what it means for your savings account
Before you can open a savings account at a credit union, you must become a member. Membership is not automatic—it is restricted by what the credit union calls a "field of membership." This might be based on where you live, where you work, your employer, your school, your profession, or a group you belong to. For example, one credit union might serve anyone who lives in a five-county area, while another serves only employees of a specific hospital system or members of a particular union.
To learn about you can join a specific credit union, you contact them directly and ask whether you meet their membership requirements. Many people can join multiple credit unions if they meet different membership criteria. Once you are a member, you can open a savings account and access whatever rate that credit union is currently offering. Membership itself is usually free, though some credit unions charge a small annual fee (typically $1 to $5) to maintain your account.
The difference between a credit union share savings account and a high yield savings account
A share savings account is the credit union equivalent of a savings account. You own "shares" in the credit union rather than holding a deposit account, which is why the terminology is different. In practice, this distinction matters very little to you as a customer—you deposit money, earn interest, and withdraw when you need it. The NCUA insures your shares up to $250,000, just as the FDIC insures bank deposits.
Some credit unions also offer money market accounts, which are savings accounts with higher minimum balances and tiered interest rates. A money market account might require you to keep $2,500 or $5,000 in the account to earn the advertised rate, and the rate might increase if your balance reaches $10,000 or $25,000. This structure allows the credit union to pay higher rates to customers who maintain larger balances, because those customers provide more stable funding.
The term "high yield" is not standardized. An online bank uses it to mean any savings account paying significantly more than the national average. A credit union might use it, or might not—some straightforward call it a "premium savings account" or "money market account." When you are comparing rates, focus on the actual APY number rather than the label the institution uses.
Credit union rates compared to online banks and traditional banks
| Institution Type | Typical APY Range | Minimum Balance | Membership Required |
|---|---|---|---|
| Online bank | 4.50% to 5.35% | $0 to $25,000 | No |
| Credit union | 4.00% to 5.00% | $0 to $10,000 | Yes |
| Traditional bank | 0.01% to 0.50% | $0 to $100,000 | No |
The rates shown above are current ranges as of early 2024, but they change frequently. Credit unions adjust their rates based on what the Federal Reserve does with its benchmark rate, just as online banks do. The lag between a Fed rate change and a credit union rate change can be anywhere from a few days to several weeks, depending on the institution.
The reason credit union rates are typically lower than online bank rates is structural. Online banks like Marcus or Ally have millions of customers and can spread their operating costs across a much larger deposit base. A credit union with 50,000 members cannot achieve the same economies of scale. However, credit unions often offer other benefits—lower fees on checking accounts, lower loan rates, or better customer service—that can offset a slightly lower savings rate.
How to find a credit union and check their current rates
Start by searching the CO-OP Network or Shared Branch locator on the Credit Union National Association website. These tools let you search by location or membership criteria to find credit unions you might be able to join. You can also search "credit unions near me" and call the ones that appear to ask whether you meet their membership requirements.
Once you have identified a credit union you can join, visit their website or call to ask about their current savings account rates. Do not rely on rates you see on comparison websites—they update slowly and may be out of date. The credit union's own website or a phone call to their member services line will give you the current rate. Ask specifically whether they offer tiered rates, what the minimum balance is, and whether there are any fees to maintain the account.
If you cannot join a credit union in your area, or if the rates are not competitive, an online bank savings account will likely pay more. But if you can join and the rate is competitive, a credit union account offers the added benefit of membership in a member-owned institution, which some people prefer for philosophical or practical reasons.
NCUA insurance and how your money is protected
Your deposits at a credit union are insured by the National Credit Union Administration (NCUA), a federal agency that works the same way the FDIC does for banks. Each depositor is insured up to $250,000 per account ownership category at each credit union. This means if you have a share savings account in your name at one credit union, that account is insured up to $250,000. If you have a joint account with your spouse at the same credit union, that joint account is insured separately up to $250,000.
The insurance covers the principal and any accrued interest. If the credit union fails, the NCUA will pay you the full insured amount, usually within a few business days. This protection is identical to what the FDIC provides at banks, so there is no additional risk in choosing a credit union over an online bank from an insurance perspective.
Frequently Asked Questions
Can I open a credit union savings account online?
Some credit unions allow you to open an account entirely online if you meet their membership requirements, while others require you to visit a branch or mail in an process. Check the credit union's website or call to ask about their account opening process. If you cannot visit a branch, look for a credit union that serves your area and offers online account opening.
What happens to my rate if the Federal Reserve raises or lowers interest rates?
Your credit union will adjust your rate in response to Fed changes, but the timing and amount of the adjustment vary by institution. Some credit unions change rates within days of a Fed announcement, while others wait weeks. Your rate is not locked in—it can go up or down depending on what the credit union decides to do.
Is there a penalty if I withdraw money from my credit union savings account?
Most credit unions allow unlimited withdrawals from share savings accounts without penalty. However, some money market accounts limit you to a certain number of withdrawals per month (often six). Check the account terms before you open to understand any withdrawal restrictions.
Can I have accounts at multiple credit unions?
Yes, if you meet the membership requirements for different credit unions, you can join all of them and open accounts at each one. Each account is insured separately up to $250,000 by the NCUA, so you can spread your savings across multiple institutions if you want to keep more than $250,000 insured.
How do credit union rates compare to certificates of deposit (CDs)?
Credit union CDs typically pay higher rates than their savings accounts because you agree to lock your money away for a set period (three months to five years). If you do not need access to your money, a CD might pay 0.50% to 1.00% more than a savings account. However, you pay a penalty if you withdraw before the term ends.