Why saving rates have dropped
STCU ranks as the best place to keep your money
College tuition is skyrocketing. Food prices keep climbing. But since 2008, savings rates have dropped a half dozen times.
What gives? While the cost of living continues to go up, federally insured savings rates at most banks and credit unions have gone down. Why?
Fed money policy suppresses rates
Low savings rates reflect the Federal Reserve's monetary policy to keep inflation in check and the cost of credit cheap, encouraging businesses and investors to make new investments, says Bill Before, STCU vice president of finance.
Low loan rates, however, are a boon to those needing to finance a car or home, or to charge purchases on a credit card. If you're looking for a way to reduce your cost of debt, this is a great time to refinance your loans at a lower rate.
How member loyalty can boost STCU saving rates
When borrowing rates are low, savings rates have to be even lower, Before says. Otherwise, the credit union could not make enough money on the margin to pay the cost to underwrite loans and operate the credit union.
"In this interest rate environment, if we paid an additional 1% on our money market rate, our net interest margin would drop significantly," Before says. "If we didn’t offset that with increased loan rates, we'd have to cut operating expenses drastically which would definitely impact member service.
"However, if every STCU member moved $1,000 in deposits and loans that they have at other institutions to STCU, it would make a huge difference," he adds. "We could immediately double the rate we are paying on money market accounts! That's the power of a cooperative where members are helping members."
Best savings rates in Washington
STCU members often ask us about the recent decline of dividend rates. For instance, a $2,500 balance in an STCU money market account earns just 0.35% APY; standard savings account, 0.25% APY. (See rates and disclosures.)
But for all the angst, STCU rates actually are higher than most financial institutions in Washington. Informa Research Service Inc., an agency that independently surveys rates for most financial institutions, found in June 2011 that STCU paid members greater dividends than Chase, U.S. Bank, Wells Fargo, and every major credit union in the state offering a $2,500 money market account balance, a $50,000 12-month certificate, a $100,000 four-year certificate, and more.
Dividends may seem low compared with the past, but the best savings rates in the state are right here at STCU. Your deposits up to $250,000 are federally insured by the National Credit Union Administration, a part of STCU's financial strength.
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