Patelco, one of California's largest credit unions, has launched a reverse-tier money market product that is offering rates as high as 3% as part of an effort to fund an expanding loan portfolio and stay ahead of anticipated rate increases across the market.
The credit union, which is based in Pleasanton and has $4.2 billion in assets and about 286,000 members, said its newly-structured Money Market Select Account and Money Market Select IRA Account offer a 3% APY on balances of $2,000 or less, 2% on balances between $2,000.01 and $5,000, 1% on balances between $5,000.01 and $10,000, 0.50% on balances between $10,000.01 and $50,000, 0.25% on balances between $50,000.01 and $100,000, and 0.20% on balances between $100,000.01 and $9,999,999.
The credit union said the new rates "far exceed money market APY offerings by competitive financial institutions."
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Under the new structure, a balance of $10,000 will earn a 1.7% blended APY and a $25,000 balance will earn a 0.98% blended APY, the credit union said. Money market rates elsewhere currently top out at 1.05%, according to Bankrate.
"In terms of timing, our goal was to be prepared well in advance of a broader market rate increase," Patelco SVP Chief Retail Officer Melissa Morgan, pictured above, said. "Once that happens we expect to see volatility in the deposit market and wanted to be certain in advance that our members were earning the absolute best rates we could deliver. Rates have been low for a long time, many people just stopped paying attention. Growing shares will be key in the coming years to fund our expanding loan portfolio."
Tiered rates are not uncommon for money market accounts at credit unions, though typically the rates are lower for smaller balances and higher for larger balances.
Morgan said the credit union has not yet begun marketing the product outside of offering it to members who come in for other banking needs. As of March 31, Patelco had 2,400 members with $31.7 million Money Market Select accounts, including new and existing converted accounts and Money Market Select IRA accounts, she added.
Last July, the credit union announced that it cut 39 fees for its members, saving them $800,000 annually, according to Patelco's estimates.
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