Tell your friends the truth about credit unions

You don’t need to wait for some special holiday to give the gift I’m about to suggest. If you are a good friend, neighbor, relative, coworker or whatever you will give the gift of credit union membership. Okay, wait don’t leave, let me tell you the real reason you should do this, and it’s not just warm and fuzzy.

First, I can’t understand why anyone decides to open an account at a bank. I’ve done it and can only think of one time when that was a good idea. I was just out of college and switched from one bank to another. That bank helped me save, so it worked out well. No other bank ever did this for me, but I’m sure that bank is out of business now. So, why use a traditional bank? Maybe, it’s the location thing. Or maybe it’s all the advertising. I sort of understand that, these things give the impression of stability and strength—that’s exactly what they want you to think. But after this year we know it’s not true.

Yes, it was a bad year to be a banker. But wasn’t it bad banker behavior that brought on the mess? Yes, it was. Bankers making bad loans were the instigators in the fall of our economy. So then what happened? Oh you know. The banks took taxpayer funds to save themselves. And, then what? Remember, then a bunch of banks failed, closed their doors. The good news? Some banks are actually paying back the money they used to get their act together. But now they won’t lend money at all. Well that’s not really true, but they are being rather tight with it. Hey, didn’t we give them money when they needed it?

Okay, so that’s the summary of what happened to banks, but what was going on with credit unions during this. Did credit unions take bailouts and close? Well, some did, sort of, but not really. It’s true that some credit unions did close or merge. It was the corporate credit unions who took some bailout money. These are the institutions that handle the investments for credit unions. And of course, because the economy’s investments were struggling, so were these institutions. But, for the most part credit unions were operating with business as usual. They were still lending money, they weren’t cutting credit lines like home equity lines, and they weren’t hiking credit card fees. They were also still issuing mortgages, respectable mortgages.

During the economic crisis to date 30 credit unions and 140 banks failed. That leaves 11,000 credit unions and 8,099 banks open. So, you see credit unions have remained stable even during this unstable time. Well, back to my point…

Times are still tough for many people. So don’t let your friends stay with a bank that’s going to make it tougher as they dream up new fees and tighten lending. The idea of switching financial institutions is painful. It requires that you actually do something and take time out of your busy schedule to get that something done. But, that’s the idea of switching. The reality of switching isn’t that bad and the gain of the switch is great. Once I joined a credit union, I’ve never looked back. It was the best financial move I’ve made.

CNN Calls Credit Unions the Best Revenge

Browsing through my online financial reading list I came across this on CNN Money and had to pass it along:

Credit unions: Best revenge for angry cardholders

Sure, 2010 looks to be marginally better once new credit card regulations kick in, but I’m still betting the bank credit card industry will find new and creative ways to extract revenue from consumer accounts. It’s their business model, after all.

But sweet revenge could be just a credit union away. A recent Pew Trust study determined that on average, credit cards issued by credit unions charge much lower fees than their bank-card brethren. For example, the median late fee on a credit union card is $20. For a bank card it’s $39. Yes, that’s right: Credit unions charge 49% less. Credit unions also offer a better interest rate deal. By law credit unions cannot charge more than 18% interest; the median bank-card penalty rate for late payments, according to Pew, is 29%. (read the rest of the article…)

Why College Students Should Join a Credit Union

Some years back I was working a good job in marketing, but having a frustrating day. So I picked up the paper (yes, it was that long ago--you could actually find jobs in the paper). I found an ad for a marketing job at a financial institution, applied and got the job. I was a bit anxious about going to the stuffy world of money, but figured I could stand to learn something about finances. I had no idea what I was in for.

The job was for a credit unit that was founded at a university and had grown to serve a wider community. My life completely changed. I know that sounds dramatic, but I had never paid any attention to credit unions before and I was surprised to learn that a financial institution could care so much about the people it served. Plus, on the job I learned a lot about money management and got my own finances on track as a result. My only wish is that I had learned all of this earlier.

During my time at that credit union I talked with quite a few students who asked "Why should I open an account at your local credit union when I can have an account at Wells Fargo, they are everywhere?"

Here's my abbreviated answer to this question in bullet points:

• Everybody learns the hard way: Most students don't live away from home for the first time and perfectly manage their money. Most students bounce checks, pay bills late and forget to balance their checkbook. Most students sign up for online banking and forget to login for months. Wells Fargo isn't likely to sit down with you and show you how to straighten out your mess. Most credit unions will. I've seen this at many credit unions, not just the one where I was working. Credit union staff will actually go through your account transaction by transaction, show you how to use online banking, ATMs, overdraft protection and other services to keep track. They also tell you exactly how to reduce your fees.
• Lower Fees: We say this so much in the credit union industry that it seems like a cliche, but it's not. Overdraft fees at credit unions are typically 1/3 lower than banks. And credit unions realize that you're human. You can talk with a credit union. If you are having a rough time or just can't do math they will help you out (see the previous bullet).
• Resource: This again piggybacks off of the first bullet, but credit unions are bursting with information and eager to share.
• Credit Unions Care: For the most part everyone I've ever met that works at a credit union has that not-for-profit spirit of wanting to help others. Credit unions do want you succeed at managing your money. I'm sure banking personnel are terrific people as well, but their business model isn't about you, it's about their shareholders, which leads me to...
• Membership: A handful of people (the shareholders) stand to profit big, big money if the bank does well. Credit unions are not-for-profit cooperatives. Members pool their money together in order to help each other. When the credit union does well all the members benefit by keeping fees and lending rates low, which keeps more money in your pocket instead of fattening some shareholders wallet.
• Volunteer Directors: So, as I've said there isn't a small group of shareholder, however, there is a Board of Directors. This group isn't paid. They are member volunteers who are elected by the membership. They bring guidance to the administration and assist with organizational health and growth. And it's worth repeating that they are volunteers, they do not receive any compensation.

I've talked to countless numbers of parents who were concerned about their son or daughter being on their own. I always tell them, with confidence, that when a student joins a credit union (university based or not) they are not alone. Credit unions are the best place to learn money management.

Fees Still Lower at Credit Unions

The Federal investigations of fees will not exempt credit unions, but we members can sleep more peacefully knowing that we are less gorged by fees than our banking friends.

The latest research comparing the fees on deposit products between credit union and bank customers by Researchers Victor Stango, a professor of economics at the University of California, Davis, and Jonathan Zinman, a professor of economics at Dartmouth College, report the following key findings:

- Average annual costs on bank checking accounts are more than twice as high as those on credit union share draft accounts.

- Some of the bank/credit union difference can be explained by a greater number of fee-incurring transactions on bank checking accounts.

- The greatest component of annual costs of both bank and credit union accounts is the overdraft fee, which is roughly one-third lower at credit unions.

Nobody likes to pay fees at a financial institution (FI) or anywhere else. Fees have always been around and were originally intended to discourage certain behaviors like paying bills late, spending more than is in your account or using another financial institutions ATM. But most FIs learned early on that fees were also a great way to make money. So they literally cashed in on consumer behavior. Over the years FIs found even that increasing the amounts of the fees didn’t change our behavior much, we still did all those things that trigger fees. So the FIs kept raising fees for easy profit. Now with profits shrinking in other areas of their business, fees have come to be looked on as even more valuable.