(Update: It has been almost exactly a year since I posted about this unique savings account, and I just cashed out my CU Thrive funds with interest. I initially wrote about this account during a limited-time 6% APY promotion, but the rate is now 3% APY and has been steady for the last year. I have updated this review to reflect current conditions and my own experience holding this CD until maturity.)
Hanscom Federal Credit Union (HFCU) has a CU Thrive account, which works like a certificate of deposit that rewards consistent saving. The rate is set for 12 months, and during those 12 months you can transfer up to $500 every month from a HFCU checking account. No monthly fees. However, you cannot make any withdrawals during those 12 months, or you will be subject to an early withdrawal penalty of 90 days interest.
This product is not meant for big balances, it is meant to encourage a modest savings habit. The interest rate of 3% APY is triple what the top high-yield savings accounts offer right now, and more than double what the top 1-year bank CDs are offering. NCUA-insured!
A bit o’ math… At 3% APY, if you maxed out this account and set aside $500 a month for 12 months, at the end you’d have put in $6,000 and earned about $90 in interest (~$97 if you made every transfer on the 1st of the each month by my quick calculations). Not life-changing, but again federally-insured and triple what you could get at another bank. $6,000 also happens to be just about the same amount as a full Roth IRA contribution. Hint, hint.
At the end of the 12 months, all accrued savings plus earned dividends will be transferred into your primary savings account. Each member can only have one CU Thrive account open at one time, but after one 12-month period ends you can open up another one (assuming it is still offered). Full disclosure (PDF).
Eligibility details. To open a CU Thrive account, you must first open an HFCU checking account. HFCU offers a free checking account with no direct deposit and no minimum balance requirement. To open a checking account, just must be a member. Like most credit unions, membership is open by family, employer, or by membership in a partner organization (which makes it open to nearly everyone). You must also keep $25 in a share account as long as you are a member.
However, if you are referred by an existing member, you can also join without any other affiliation and you can currently get an additional $30 bonus after being an active member for 90 days, and the referring member gets $30 as well. If you’d like, here is my referral link.
Account opening process. I started the online application and said I would join the Nashua River Watershed Association for a one-time $35 fee (I didn’t know about the refer-a-friend option at the time). I had to provide the usual personal information and then answer questions based on my credit report to verify my identity. Based on my free credit monitoring, they did not perform a hard pull on my credit report. You can fund with an online bank transfer but they also gave me the option to fund with credit card up to $2,000. They didn’t mention if this would be considered a cash advance or not, but it showed up as a purchase on my American Express card. Finally, you must print out, sign, and mail in a signature card. You can also open an account in-person. All of their physical branches appear to be located in Massachusetts.
One-year update. Over the past year, I had set the maximum $500 to be transferred every month to my CU Thrive account from my HFCU Checking account. I made 11 transfers but missed one because my checking balance was too low on the date of automatic transfer. When that happens, the account basically just skips the transfer. There is no penalty, you just don’t get to earn interest on that money. I called them but they said there was no way to replace that transfer, even if I moved more money into the checking account a day later. Other than that, everything went very smoothly and I was paid my interest as promised. At the 1-year maturity date, the funds were automatically transferred to my HFCU savings account and the CU Thrive no longer shows up on my online account page. I guess now I can open up another one if I wanted to.
(Side note: I discovered that Hanscom Federal has paid a “Loyalty Dividend” to its Credit Union members for over 15 consecutive years. For 2014, they paid a 2% bonus on dividents earned and consumer finance charges paid over the year. So on top my my $78.46 of interest earned in 2014, I earned another $1.57 in bonus loyalty dividends.)
I think this account is nice for people looking to build up a savings habit, but it really works best if you use HFCU as your primary checking account. Juggling it as an additional piggy-back account is do-able but you have to keep on top of your transfers to avoid idle cash earning zero interest.
When it comes to paying a one-time fee to join a credit union, I like to see that the credit union has a history of offering member-friendly products. In addition to the CU Thrive and free checking options, HFCU also has a competitive Home Equity Line of Credit (HELoC) with no application fee, no annual fee, and no closing costs if you keep it open for 24 months. I’m thinking of opening one just to have around, does anyone have experience with this HELoC?