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Bank vs Credit Union/Compare/Contrast these 2 Accounts

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Boxing Banker
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Bank vs Credit Union/Compare/Contrast these 2 Accounts  Reply with quote  

Hello everybody, I'm brand new to the forum and could really use some help with personal finance and such. I'm a pretty young guy and don't have much experience in finance unfortunately, so all advice is appreciated.

So what it comes down to is I have about $50,000 in my current money market account which has terrible interest rate. I would like to switch to a larger bank or possibly a credit union, but I have no idea which I should go with. What are the downsides to a credit union? I mean, I keep hearing nothing but amazing things about credit unions, but I have to wonder how banks could possibly survive if there is no downside to a credit union. There has to be a catch somewhere.

I was thinking of either going with this platinum money market bank account:

https://www.usbank.com/savings/todays-savings-rates.aspx?display=platinum-select-money-market-savings#

or this credit union money market w/member advantage account:

https://www.becu.org/~/media/Files/PDF/9115.pdf

I will be able to put about $500 per month into whichever account I choose for the next 6 months or so, but then it will have to drop down to about $100 per month from there on. So basically, I am wondering, which account should I choose/why? And also, how much money would be in each account at the end of a full year assuming I put in $500 per month for the first 6 months and then $100/month thereafter? I know this thread sounds like a pain in the ass, but I'm losing sleep over this decision lol. I have met with both financial institutions but I still can't decide which to choose.

And what about CDs? I don't know the first thing about them, but should I instead be looking into getting one of these with one of these institutions rather than a money market account?

Any and all advice is helpful/appreciated. Thank you all so much.
Post Tue Aug 02, 2016 6:46 am
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Boxing Banker
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I guess I also should have mentioned that my tolerance for risk is extremely low at this point as I want to buy a house within the next 2 years and I think that since it took my whole life just to save that much, I would hate to have to start over.
Post Tue Aug 02, 2016 6:53 am
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oldguy
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quote:
I would like to switch to a larger bank or possibly a credit union, but I have no idea which I should go with. What are the downsides to a credit union? I mean, I keep hearing nothing but amazing things about credit unions,

And also, how much money would be in each account at the end of a full year assuming I put in $500 per month for the first 6 months and then $100/month thereafter?

And what about CDs?


As a wealthy old retired guy, let me point out to you that you are working on the wrong problem.
Most of us are given about 30 years for "wealth-building" followed by many (?) years of "wealth-preservation".

The 'preservation' products are designed to offset inflation (but not to build wealth). Ie, the returns are in the 1% range and inflation runs at about 1.5%. Savings, CDs, Money Market, etc , actually cost you to store your money safely - but you lose purchasing power as you store the money. And whether you store this money at 0.5% or 0.6% or 1% is academic, it has almost no effect on your far-future.

The 'building' products are designed to outpace inflation (the generic US stock market returns an average of 11%/y) so that your purchasing power compounds by 8% or 9%/y.

My advice with houses, cars, etc, is to save up the money for the down payment but then DON'T spend it there, instead, retain the use of that cash. That gives you the same safety reserve as someone who made a big down payment - only their money is in house equity, yours is in cash.

As for your $50k plus $500/m - that will be $2,570,000 in 30 yrs if you keep it in 11%/y products.
(Your $50k provides $1,150,000 of that $2,570,000 - ie, you have already built a substantial part of your far-future.)

As for being extremely risk averse - do the math for yourself, understand the power of compound interest, as you learn those concepts your confidence will grow. And you'll be able to judge high risk, moderate risk, low risk - and be comfortable with the risk level that you seek.
Post Tue Aug 02, 2016 3:59 pm
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