good things come to those who rate

By: Michael Buchmeier

April 3, 2018

There has been a lot of criticism in recent years over savings interest rates. Some of us remember when 1% was low for a savings account. Unfortunately, even as the economy slowly improves, rates are unlikely to rise very high. A better understanding of rates will help you be more financially successful. The Federal Reserve may raise rates but most institutions do not want to raise rates too often just to lower them again. There is a silver lining though. Savings rates and loan rates are connected. If savings rates rise—so will loan rates. If savings rates are low—so are loan rates. Today is a loan/mortgage market. Enjoy low interest rates as you get that car or home.

In this day and age it is all about relationships. The more you use your financial institution, the more benefits you will reap. If you’re looking to take advantage of some great offers, check out our Relationship Perks. Every member with an active checking account (a minimum of 5 transactions in the most recent month) receives a 0.25% APY* discount off the posted rate of any new direct consumer loan and an additional 0.25% APY* discount if you have direct deposit (does not apply to specials). On the other hand, most of us still want to earn money from our accounts. You can get 0.10% added to the APY* of any new share certificate or IRA with Relationship Perks (does not apply to specials).

Share certificates are similar to a certificate of deposit (CD), but issued by your credit union instead of a bank. It is a deposit that is made for a certain period of time that earns specified dividends over that period. Share certificates are popular because they are secure savings vehicles that offer guaranteed dividends at the end of the term. Are you curious the amount of dividends a certificate would generate?  There is an easy way to calculate an approximate amount earned.  I = P x R x T or Interest = Principal x Rate x Time (# of Days in Certificate/365). 

$5,000 at 1% APY* for 2 years or 730 days
5000 x 0.0100 x 30/365 = $4.11/month (30 days)


5000 x 0.0100 x 730/365 = $100 after 2 Years (730 days)


5000 x 0.0110 x 730/365 = $110 with relationship perks after 2 years (730 days)

In addition to the approximate amount earned, there is the compounding interest to take into account. Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. So if you earn $4.11/month (30 days) on the certificate in the example and it compounds monthly, after the first month your principal has gone up with the addition of the interest you earned and the interest would now be calculated like this:

After 1 Month: $5,004.11 x .01 x 30/365 = $4.11/month
After 2 Months: $5,008.22 x .01 x 30/365 = $4.12/month
After 3 Months: $5,012.34 x .01 x 30/365 = $4.12/month
After 4 Months: $5,016.46 x .01 x 30/365 = $4.12/month
After 5 Months: $5,020.58 x .01 x 30/365 = $4.13/month
After 6 Months: $5,024.71 x .01 x 30/365 = $4.13/month

You can see how the interest slowly starts to add up in the amount you earn per month. As your principal grows each month, so does the amount you earn per month. That’s how compounding works. Be sure to look closely at the terms of the certificate you are getting to see how often they do the compounding on it and the length of the term. These can both effect how much you earn over time in a certificate. Also, be sure that you won’t need the money you are putting into a certificate because early withdrawal penalties can come into play if you have to withdraw before the term ends and can negate what you’ve earned.

Another great option to earn more money is with our Reward Checking, which earns CD-like interest when you meet 3 monthly requirements. Sign up for and receive e-statements, have at least one automatic payment or direct deposit post and clear per qualification cycle, and have at least 10 cleared debit card transactions post and clear per qualification cycle. Not only does Reward Checking offer a higher dividend rate, the account also offers free ATM refunds up to a limited amount per cycle.

In addition to these money saving/earning options, the Credit Union also offers many other checking and savings products that can earn you dividends which you can now calculate. We are here to offer you products which can make you a financial success, so ask us how to earn more or save more money. A long term goal may require a little more effort, but it will be worthwhile.


*APY = Annual Percentage Yield. Your savings are federally insured to at least $250,000 and backed by the full faith and credit of the United States Government, the National Credit Union Administration, a U.S. Government Agency, and up to an additional $250,000 by Excess Share Insurance, for a total of $500,000. IRAs are separately insured to $250,000 by the NCUA, and an additional $250,000 by ESI, for a total of $500,000.