Jumbo Certificates are here – and higher rates for savings too

Effective February 1, your Alliant savings accounts with balances of $100 or more earn a higher rate of interest than before, AND if you have extra funds on hand, you can earn even higher rates – up to 2.15% APY2 – with an Alliant Jumbo Certificate.

Below, we’ll provide a wrap-up of our new rates and then summarize the basics of Certificates for members who may be unfamiliar with them: what they are, their advantages and drawbacks, and what “Jumbo Certificate” means.
 

New rates effective TODAY!1

The Alliant Board of Directors recently approved the rate increases shown below, effective February 1, 2015.

Savings1

0.90% APY1 for all balances of 
$100 and above in these accounts          
Regular savings accounts
Traditional, Roth and SEP IRAs
Coverdell Education Savings Accounts
Supplemental savings accounts
Alliant kidz klub savings accounts


Certificates2

Certificate Type 12-23
  month term
24-35
   month term
36-47
   month term
48-60
   month term
Regular Certificate
($1,000–$24,999)    
1.00% APY 1.15% APY 1.35% APY 2.10% APY
Jumbo Certificate
($25,000+)
1.10% APY 1.20% APY 1.40% APY 2.15% APY


 

Certificates 101 

What are Certificates?

A credit union Certificate is a special type of deposit account that pays higher interest than regular savings accounts in exchange for the Certificate holder’s commitment to keep the money in the account for a set amount of time. The amount of time you commit to – also known as the “term” – can vary, and the date on which the term ends is called the Certificate’s “maturity date." If you withdraw the funds from the Certificate before the maturity date, there is a penalty. Unlike most credit unions and banks, Alliant offers Certificates at terms you can customize – from 12 to 60 months, giving you the ability to maximize your earnings before paying for life’s major events. 

If you’re thinking that a Certificate sounds a lot like CDs (certificates of deposit) that are offered by banks, you’re absolutely right. A Certificate at a credit union is very similar to a CD at a bank. They are the same type of account, both have a set term and maturity date, and both are insured, along with your regular savings accounts, up to a total of $250,000. The two main differences are the financial institution at which you open the account (a credit union for Certificates vs. a bank for CDs) and the entity that insures it (the National Credit Union Administration [NCUA] for Certificates vs the Federal Deposit Insurance Corporation [FDIC] for CDs). 
 

What are the advantages and disadvantages of Certificates?

The prime advantages of Certificates are that they earn a locked-in, higher rate of return than do regular savings accounts, and that they are safer compared to other types of investments that could yield a higher return. For example, an investment in stocks, a mutual fund, real estate or a business venture could potentially earn a higher return, but there is also a risk of not making money – or even losing your initial investment. With Certificates, on the other hand, your rate of return is guaranteed and your funds are NCUA insured up to $250,000. 

The disadvantage of Certificates is that your money is tied up for the term of the Certificate. You can’t withdraw the funds whenever you want without penalty, like you can from your savings or checking account. This means that Certificates are not a good choice for funds that you will need in the near term. For example, if you have saved the money to pay for your honeymoon, and your wedding is in two months, a Certificate would probably not be a good account in which to deposit your honeymoon funds. If your wedding is in November 2016, on the other hand, a Certificate with a term of 12 or 18 months might be a good account for those funds. You’d earn higher interest for the term of your Certificate, and you could cash out the Certificate on its maturity date so that your money would be available to you in time for your wedding.

Another disadvantage of Certificates is that you have to commit more money to them than to a regular savings account. For example, an Alliant regular savings account earns dividends when you maintain an average daily balance of $100, while an Alliant Certificate requires a minimum deposit of $1,000. But Alliant’s minimum is far less than many financial institutions require to earn the same interest rate. Many institutions require $10,000 or more for their higher rates.
 

What is a Jumbo Certificate?

If you have more than $25,000 of funds available for deposit in a Certificate, you can open a Jumbo Certificate and earn even higher rates. Jumbo Certificates, as the name implies, are special certificates issued for large deposit amounts. Because you are committing more funds into a Jumbo Certificate, they pay a higher rate of return. Many financial institutions only offer Jumbo Certificates and CDs – and their corresponding higher rates – for deposits of $100,000 or more. Investopedia, in fact, states that “Jumbo CDs are typically bought and sold by large institutional investors, such as banks and pension funds,” because so few individual investors have more than $100,000 to deposit. But Alliant offers its Jumbo Certificates starting at $25,000 to better accommodate the needs of its members for a safer high-yield savings vehicle.

 

What types of Certificates does Alliant offer?

  • Share Certificates (known as "Certificates")
  • Jumbo Certificates
  • Traditional IRA Certificates
  • Roth IRA Certificates
  • SEP IRA Certificates
  • Coverdell Education Savings Account Certificates

To learn more about Alliant Certificates, visit our website.

 

Sources: Alliant web site and Investopedia
1. The February 2015 savings dividend provides an Annual Percentage Yield (APY) of 0.90%. The APY is accurate as of the 01/29/2015 dividend declaration date. Dividends are paid on the last day of the month to accountholders who have maintained an average daily balance of $100 or more. Savings dividend may change after account is opened and is subject to change monthly.
2. APY = Annual Percentage Yield. The APY is accurate as of the 01/29/2015 dividend declaration date. Early withdrawal penalties apply if Certificate is closed before the maturity date. Visit alliantcreditunion.org for details and additional information.