OnPath Credit Union

When it comes to high-yield savings accounts, customers are often drawn to the promise of higher interest rates. However, they might also encounter various fees and penalties that can diminish the account's overall benefit.

Many of the differences consumers will find between credit unions and other banks can be attributed to the profit motive. This is reflected in high-yield savings and checking accounts as well, where banks would prefer to pay you less for the dollars you put in their accounts or make up for the interest they pay by charging higher fees.

The Rationale Behind Fees and Penalties in High-Yield Accounts

High-yield accounts offer higher interest rates compared to standard savings accounts, which is a significant draw for savers. However, these accounts often come with conditions that increase profitability for the bank or limit the saver’s access to the funds.

Maintenance Fees

Banks may charge monthly maintenance fees on high-yield accounts to offset the costs associated with offering higher interest rates. These fees can vary based on the account balance or other account activities.

Minimum Balance Requirements

Many high-yield accounts require a minimum balance. Falling below this minimum can result in fees or reduced rates. These requirements are in place to encourage customers to maintain higher balances, thereby providing the bank with more capital to lend to other customers.

Limited Transactions

High-yield savings accounts often limit the number of certain types of transactions, like withdrawals or transfers. Exceeding these limits can lead to fees. These restrictions are partly due to regulatory requirements and also to ensure that the funds remain in the account longer, allowing the bank to utilize these funds more effectively.

Early Withdrawal Penalties for CDs

For high-yield Certificates of Deposit (CDs), withdrawing funds before the maturity date can incur significant penalties (like the loss of accrued interest). These penalties ensure that the bank can rely on the deposited funds for the agreed-upon term, which is essential for their lending and investment activities.

OnPath Federal Credit Union is committed to providing flexible savings solutions to members. For example, members who enroll in a Wealth Builder Account can earn up to 2% APY while still enjoying three consequence-free withdrawals per month.

How Do Credit Unions Compare?

Credit unions, while also offering high-yield accounts, often have a different approach when it comes to fees and penalties:

Lower Maintenance Fees

For-profit banks of all kinds, whether they’re online banks or nationwide juggernauts with branches on every other street corner, are always seeking the perfect balance between profit and competitiveness. If they charge too much, their customers may take their banking elsewhere, but if they charge too little, their owners and investors won’t be happy with their performance.

Credit unions don’t have the same incentive. Proceeds are reinvested into the credit union instead of paid to shareholders, meaning the incentive that exists at for-profit institutions isn’t present at credit unions.

More Lenient Minimum Balance Requirements

Credit unions sometimes have lower minimum balance requirements compared to traditional banks, making it easier for more people to benefit from high-yield accounts without the stress of maintaining a high balance.

Fewer Transaction Limits

While credit unions still need to adhere to regulatory requirements, they may offer more flexibility with transaction limits. This flexibility is part of their commitment to providing member-friendly services.

More Reasonable Early Withdrawal Penalties

For high-yield share certificates, credit unions might impose less severe early withdrawal penalties than traditional banks. This aligns with their overall ethos of being more member-focused and understanding of individual financial needs.

Save Your Money at an Institution That Puts You First

While credit unions have similar withdrawal and minimum account balances as banks, they tend to be less stringent and harsh. As a member-owned, not-for-profit financial institution, the goal of OnPath Federal Credit Union is to offer consumer-friendly high-yield savings products designed for safety and convenience while maintaining the flexibility to accommodate the real-world situations experienced by banking customers.

You can learn more about our high-yield checking, savings and share certificates on our website, or call us at 800.749.6193 to learn more about becoming a member.