Score low fees and high interest rates at a CDFI

Savings book with money protruding

If a bank or credit union in your neighborhood is a Community Development Financial Institution, that's where you should be putting your money.

CDFI's offer free checking accounts, competitive interest rates on CDs and savings accounts, no-fee credit cards and other services including low-interest mortgages to borrowers who may not be able to get a home loan elsewhere.

More than 800 organizations are now certified by the CDFI Fund, which was established by the federal Riegle Community Development and Regulatory Improvement Act of 1994.

There are six different types of CDFIs – including banks and credit unions – that are committed to lending to the residents and businesses in the communities they serve.

These are usually working-class city neighborhoods where payday loan stores, pawn shops and check-cashing offices are more common than bank branches.

You can locate one near you using this directory of current CDFIs in every state.

Taking advantage of a CDFI is especially important for consumers facing higher monthly fees and other new charges on their current checking account at a big regional or national bank.

While CDFIs are in business to make a profit, their philosophy makes them work more in your favor.

So what should you look for in a CDFI?

The same things you’d look for in any other bank: FDIC-insured, low or no fees, good customer service and easy access to your money.

The largest CDFI is Urban Partnership Bank, which has $1.4 billion in assets and seven branches in Chicago, Cleveland and Detroit.

Its Direct Access checking account can be opened with as little as $100 and provides free withdrawals at 43,000 ATMs, free online banking and discount money orders and cashier checks.

The $7.50 monthly fee is waived just by making five or more monthly purchases with the free VISA debit card.

That's anyone's idea of a good, consumer-friendly checking account.

Its Online Savings account pays 1.00% APY, and its 5-year certificate of deposit earns 2.42% APY.

Only a handful of banks in the country pay better returns on those types of deposits.

Here's another example: Self-Help Credit Union based in Durham, N.C.

Its Basic Individual Checking account charges no monthly fee and actually pays interest (currently 0.25% APY) on accounts that maintain a minimum average balance of just $100.

The 1.01% APY it's paying on 3-month CDs and 1.77% APY on 24-month CDs beat the best nationally CD rates from any bank.

Members can also benefit from VISA credit cards with no annual fee and obtain mortgages with credit scores as low as 580 – a subprime credit rating.

Deposits at both of those CDFIs are federally insured.

What more could you want?