FW Finance FAQ: Credit Unions

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NEW!3.75% 2/2 ARM as of 11/30/04 - Patelco Credit Union

NEW!5% 5 yr Insured CD @ Telcom Credit Union

CUs that anyone can join

Comparing benefits and services at CUs and banks

CU and Bank Accounts in Canada for US resident

* Pentagon FCU Car Loans
* CU Deposit Insurance
* S&P500 Index Market CD
* Digital FCU CDs
* CU CD Rates
* Patelco CU
* CDs in CUs/banks
* Boeing Employees CU
* Wire Transfer Pricing at Banks and CUs
* Pentagon Federal CU HELOCs
* CU approves the refi HELOC, we're going for it
* Bankrate: CUs move into the technological age - while keeping their member focus
* Bankrate:CUs lead the way in high-tech banking
* Credit Union Monthly Averages from Bankrate

Q 1. WHAT ARE CREDIT UNIONS?
CUs are NONPROFIT financial cooperatives. History of Credit Unions and NCUA CUs offer excellent consumer value due to: nonprofit tax-exempt status; small number of B&M branches; low-overhead operation; lending focus on individual consumers and small businesses rather than on corporate and international trade transactions. NCUA Frequently Asked Questions

Q 2. WHO CAN JOIN A CU?
CUs serve specific "Fields of Membership"(FOM): a company, an occupation, a church, or communities of persons who "live, work or worship" locally. The Federal Government's Access Across America campaign seeks to promote CU membership.

Q 3: HOW CAN I JOIN A CU?
You apply for membership based on qualifying in the CU's Field of Membership (FOM). CUs require that new members deposit a minimum "Share Savings" deposit (ranging from $5 to $50), and maintain that minimum deposit as long as they remain members. A few CUs charge an application fee, typically $5. See this CU Membership Discussion

Q 4: HOW DO I MAINTAIN A CU MEMBERSHIP OVER TIME?
Many CUs honor "Once A Member, Always a Member": as long as you maintain the minimum "Share Deposit" you retain full member privileges, even if you no longer live, work, or worship within the FOM.

However, a few company-sponsored CUs (where the company actively subsidizes the CU as an employee benefit) may restrict former employees from opening new CU accounts or taking new CU loans. Ask your particular CU about any such restrictions.

Q 5: HOW DO CREDIT UNIONS' AUTO LOAN RATES COMPARE?
For car loans, CUs often offer THE BEST overall rates and terms in the marketplace. See Credit Union Car Refinancing thread By financing through a CU instead of a dealership, you can take advantage of "cash rebate" programs which you would forfeit with dealer-offered "0% Financing". Many CUs will also "meet or beat" loan rates offered by competitors like PeopleFirst.com.

Used-vehicle rates at CUs tend to be particularly attractive. CUs also impose lower loan-transaction "fine print" fees and costs than most banks. CU loans are relatively customer-friendly, and you are unlikely to get stuck with "Rule of 78" loan amortization sometimes offered in car-dealer financing.

Q 6: WHAT LOAN TYPES DO CREDIT UNIONS OFFER?
CUs offer home improvement loans, HELOCS and HELS, educational loans, computer loans, and first mortgages.

Many CUs often offer small consumer loans that banks ignore: $1,500 to pay an orthodontists' bill for fixing their kids' teeth; $2,000 for a summer vacation to Wisconsin; $1,900 for emergency travel to a relativesí funeral.

Q 7: IF I'M REBUILDING MY CREDIT, WILL A CU HELP?
CUs tend to take a personalized "case-by-case basis" approach to lending to individuals with spotty credit histories. For persons with past credit problems, a CU may be more likely to offer them a low-limit VISA/MasterCard (i.e. $500 line) than a bank would - and NOT rip off the member with predatory fees, charges, and rates.

Q 8: COMPARE CU DEPOSIT ACCOUNTS WITH BANK ACCOUNTS?
CU deposit accounts generally offer better interest rates, and lower fees and charges, than traditional banks (excepting Internet banks). CUs often use the term "dividend" in lieu of "interest" on savings account, to underscore the notion that you are an OWNER instead of a LOANER.

In addition to the basic Share Savings Account, many CUs offer Money Market Accounts and CDs with low minimum balances. Many CUs also offer S&P500 Index-based Market Rate CDs

Most CUs offer checking accounts ("Share Draft Accounts") with very low monthly fees and costs. Check reorders, money orders, and cashier's checks are inexpensive, and notary service is usually offered without charge. Many CUs provide Bill Pay service, sometimes for a monthly fee.

Q 9: HOW DO CU ATM CHARGES COMPARE WITH BANKS?
CUs typically offer lower charges, like this:

1). No-Fee access to their own CU ATMs.

2). No-Fee access to other ATMs (no "foreign ATM charge"), but other ATM operators' surcharges may be imposed against the cardholder's account.

3). No-Fee access to Selective-Surcharge ATMs in the CO-OP Network, Member Access Network or the Credit Union 24 Network These networks provide participating CUs' cardholders with no-charge access to thousands of ATMs throughout North America.

Q 10: WHAT ABOUT ONLINE BANKING, BILL PAY, TELEPHONE BANKING?
CUs have upgraded their online banking in the past year, including real-time transaction viewing and Bill Pay. Most also offer 24-hour automated telephone banking systems.

Q 11: ARE CU DEPOSITS INSURED BY THE FEDERAL GOVERNMENT?
Sometimes yes, sometimes no. CU Insurance Thread

Each CU decides whether to join NCUAor to offer private deposit insurance. Most CUs are NCUA members and pay NCUA insurance premiums. NCUA insurance is backed by the U.S. Government like the FDIC. NCUA insures member accounts up to $100,000 per depositor.

Q 12: HOW DOES A CU COMMUNICATE WITH ITS MEMBERS?
Members generally receive a mailed quarterly or monthly account statement, including a newsletter announcing CU products, promotions, meetings and education seminars. Many CUs also inform members of upcoming events on their web sites.

Q 13: WHAT ARE FINANCIAL COUNSELING AND EDUCATION SERVICES OFFERED BY CUs?
Many CUs offer free or inexpensive financial counseling and education: credit counseling, household budgeting, saving and investment strategies, car buying. These services are a great benefit of CU membership. As eloquently stated by the Access Across America mission statement:

<< We believe that through empowering and facilitating the process for folks from all walks of life to access affordable financial services, more Americans will be prepared with the financial literacy skills and resources to achieve financial freedom from many of the predatory establishments.. >>

Q 14: WHAT'S THE DIFFERENCE BETWEEN BEING A "CU MEMBER" AND A "BANK CUSTOMER"?
Many CUs operate on the "Once a member, always a member" and "members helping members" principles. This is the biggest difference between banks and CUs.

On rare occasions, banks may abruptly terminate a customer's account relationship without notice because of some problem - i.e. a manager believes the customer has abused their account or committed fraud. A bank's action can damage a customer's reputation if they are "blacklisted" with ChexSystems.

CUs are not perfect, but typically they will contact the member personally before taking drastic actions against a member's account. CUs are diligent about deterring fraud, but they value their member-owners more highly than banks do. If a CU must close a particular deposit account, you can still maintain your MEMBERSHIP and your Share Savings Account except in the most extreme cases.

CUs are governed by Boards of Directors who are active members of the CU and who are elected by the membership at annual meetings. Most CU board members are unpaid volunteers. Each member has a vote at the CU annual meeting, whether they have $100 deposited or $90,000. The CU is a cooperative that exists for members to help each others - "Not For Profit, Not for Charity, But For Service".

Q16. WHAT'S THE DEAL WITH SOME CREDIT UNIONS CONVERTING TO BANK CHARTERS?
Some credit union managers and board members have decided, for various reasons (including perhaps the opportunity to build a higher-paying career working in a for-profit institution) to cleverly work with consultants to convert their CUs to banks. Some web sites on this topic worth looking at are:

Save Columbia Credit Union, Vancouver, WA

Credit Union Conversions consultant CU Financial

Q 16. ARE CU MEMBERS MORE SATISFIED WITH THE SERVICES THEY RECEIVE THAN BANK CUSTOMERS?
CUs often earn higher customer satisfaction ratings than banks. CU members report that the quality of service and the consumer-focused down-to-earth attitude of CU personnel are a refreshing change from what they experience with banks. While CUs only account for about 6% of total deposits in the U.S., their influence on our financial institutions has been very significant.

nice job. you may want to comment on fdic status of CU's. I dont know what it is, or if it varies, but I know it will be a question people will want to know the answer to before they take the plunge.

Good job SN, very useful.

CU's generally have maximum loan sizes in various categories as established by the NCUA. That makes them iffier on large loans, but they are often especially good for small loans.

For example my main credit union here, STCU.org, will do a free appraisal, title search, etc AND charge no fees on any HELOC that draws $5K or more at close--something I've seen nowhere else.

SeattleNative said:

<< 4. Credit Unions generally offer lower fees and transaction charges, and somewhat higher savings interest rates, on deposit accounts than banks. >>


SN, just a theoretical question. Are there any bad credit unions? I mean with minimum balances, fees, interest rates and customer service on par with a notoriously bad retail bank like Fleet? Or is there peer pressure that keeps them in line?

Someone replied to me here, a couple of months ago, that many credit unions can provide signature guarnatees. These guarnatees often are required to close out mutual fund accounts. I checked with my CU, and they confirmed that they can do SG's.

Also, my credit union will readily cash Series I and EE US Savings Bonds. Reportedly, some banks will not cash the I's.

Some CU's may bend the rules to qualify you as a member. I called the "Smallville Credit Union" in a nearby suburb of "Smallville" to ask what their membership requirements were. "Do you live in Smallville?" "No, I don't." "Do you have any family members who live in Smallville? Don't you have a brother who lives here?" "No, I don't." Then she very deliberately repeated the question, "Don't you have a brother who lives in Smallville?"

CUs generally allow family members to join (and use a pretty broad definition of "family" too. If you are interested in joining a CU but can't qualify on your own, ask members of your family if they belong to any CUs.

Some CUs charge a little higher interest on loans and pay a little higher on deposits. Others take the opposite approach. If you are a member of multiple CUs, you can sometimes make out a little better by borrowing at one but saving at another.

I would join every CU I could qualify for. As was mentioned, you can stay a member forever with a very small balance. You never know when you might need access to a different financial institution on short notice.

Military folks can get in on CU's too. So, if you have immediate family member that is in the military, put in the $25 or so to start an account while the person is enlisted. Also, some employers offer CU's. If yours does not, check immediate family as you can usually join from them.

My Dad left the Navy 35 years ago and still has his Navy Federal account.

are loans pretty much the only advantage with credit unions

many say they pay higher on deposit accounts but i dont seem betting ing or netbank

i have a few accounts with different online banks and one with a local bank what am i messing something

now i see there are deals like these available

http://www.fatwallet.com/forums/forum.php?catid=52&threadid=171389

Branchless Internet banks have attractive products but U.S. consumers have avoided them. The largest Internet banks are susidiaries of larger financial businesses:
E*Trade Bank
American Express Membership B@nking
State Farm Bank
USAA Bank
GMAC Bank
ING DIRECT

These banks have some market share among affluent investors, but most Americans still prefer trusting their money to institutions with local physical offices.

one of the EASIEST criteria to meet for CU membership is having "worshipped" in a particular area....

These days, most credit unions could care less if you fit their membership criteria. There is one around where I live that I joined without even coming close to fitting the bill. They didn't even ask me if I qualified- they just wanted the business.

A suggested addendum to #9:

If you leave the 'Field of Membership' (move, change jobs, get excommunicated from your church, whatever) you can usually maintain your current accounts, but you can't open new ones.

JClark: Most CUs practice "once a member, always a member" and encourage continued patronage, including opening new deposit accounts and loans, after you leave their FOM. Occasionally, smaller CUs may restrict your member privileges after leaving their FOM - it depends on that particular CU's management and mission.

See these links about a 1998 Supreme Court ruling against credit unions, which was quickly remedied by Congress through new CU-friendly legislation:
1998 Supreme Court ruling against CUs
President Clinton signs Credit Union Membership Access Act
New law allows credit unions to make more business loans

The only FOM concern I'd have is if CU regulators were forced to audit member enrollments.

humm i guess i should start looking for a good houston credit union

one thing though the bank i work at (wamu) almost never gives out auto or personal loans and has high rates on house loans 5.85 well its not too high but ing has as low as 4.5 or something around there

if anyone knows of a decent one let me know

----

and yes people are very weary of online banks unless the bank has a huge easy to recognize name like

wamu
wells fargo
bankone
or citibank

pretty much the bank has to have a branch in the area for people to even consider opening an account with them

i did get my brother to open up an ing and usaa account and he enjoys the atm rebates and cashback and high rates but my mom was a no go

i just opened a new account from a local bank, my CU charges more monthly fee than any other bank
take a look at CU of So Cal

Some CUs product offerings are aimed at very specific member groups. I've even seen some CUs whose product pricing is HIGH and and their services aimed at affluent members.

A personal friend in Alberta had a bad experience with a CU where she had banked for many years and had a very positive long-term borrowing history. The CU manager refused to offer her a truck loan. Her favorable CU credit history didn't help her credit rating elsewhere because that CU refused to report members' credit history to any credit bureaus. She eventually financed a truck through the dealer, but the experience was very upsetting.

Ask your CU which credit agency they report to. It could be frustrating building an excellent CU credit history only to learn years later that they don't report your credit to any of the Big 3 bureaus.

In the current bear-market economy, consumers have joined credit unions in record numbers.

Thanks SeattleNative for this thread.

I don't think I read this in your original post, but I think there is one slight inconvenience about credit unions to keep mind. This may not be true for all credit unions, but my credit union uses a different routing number for electronic transfers than regular check payments which has caused some minor problems when making online or phone payments. Also, I cannot interface with some internet only banks because of the different routing numbers.

In the past I provided the wrong routing number for an electronic transfer payment using my check routing number. The payee asked for numbers at the bottom of the check instead of the ACH number. (They don't always know in advance that this is a CU account and that my CU routes checks through another bank.) Later I was advised to ask beforehand when making payments by routing number whether the payee will process payment by electronic transfer (ACH) or paper.

I prefer to "bank" locally with my CU, but run into problems transferring funds from my CU account to internet only banks like INGdirect and Principal (Interest is higher at ING than my CU, Principal offers free electronic billl paying while my CU charges a monthly fee). I cannot do ACH push/pulls with these banks and therefore have to mail in deposits or use deposit sharing ATM's which are far and few where I live. (However, Principal offers free postage paid deposit envelopes, and ING offers ACH push/pull with Principal.)

I would never close my CU account because of any inconvenience because once you do, you lose your right to rejoin if you are no longer in the FOM.

Tooshy: thanks for the info re routing-number discrepencies. You have raised some very interesting issues about routing numbers for initiating Pre-Authorized Transfers and ACH Pulls. If anyone else has knowledge on this, please feel free to chime in.

The current issue of Time magazine has an article on credit unions.

Links are in main post.

Some CU's offer fee free traveler's cheques, i.e. mine provides fee free American Express Traveler's Cheques. I don't know if many bank offer traveler's cheques fee free or not, since I have not had a "traditional" bank account for many, many years.

Add my vote in support of CU's !

I don't understand people who get upset when they don't get loans. It's not an obligation to extend a loan. I recently joined a CU and on my first visit while I was opening the account, I asked if they reported to all three credit bureaus.

SeattleNative said:

<< Some CUs product offerings are aimed at very specific member groups. I've even seen some CUs whose product pricing is HIGH and and their services aimed at affluent members.

A personal friend in Alberta had a bad experience with a CU where she had banked for many years and had a very positive long-term borrowing history. The CU manager refused to offer her a truck loan. Her favorable CU credit history didn't help her credit rating elsewhere because that CU refused to report members' credit history to any credit bureaus. She eventually financed a truck through the dealer, but the experience was very upsetting.

Ask your CU which credit agency they report to. It could be frustrating building an excellent CU credit history only to learn years later that they don't report your credit to any of the Big 3 bureaus.
>>


Gator Deb: Lenders make a lending decision based on the borrower's likelihood of fully repaying the loan principal and interest. When a client/member has established a positive credit history with a CU or bank, loan rejection for a reasonable loan request can be very disappointing. Some small CUs are cliquish withlending decisions made in an unprofessional and arbitrary manner. "Playing favorites" among loan applicants is NOT the norm for CUs, but it may occasionally happens some smaller CUs and banks. This is compounded when years of favorable credit CU history has gone unreported to credit agencies, putting the borrower at a disadvantage when applying for credit with other lenders.
:I don't understand people who get upset when they don't get loans. It's not an obligation to extend a loan.

Washington governor signs bills combating fraud
OLYMPIA, Wash. (5/13/03)--Washington Gov. Gary Locke signed into law Monday a sweeping financial-fraud package to crack down on crimes against consumers, credit unions and banks.

NCUA Mid-Year 2002 Statistics Federally-insured CUs' assets exceed $500 billion.

Has anyone here had negative experiences with CUs?

I frickin love my local CU and use it for local banking needs to deposit cash and checks. My CU also has one of those coin star machines which is the bomb.

I do use USAA for internet banking and to do ACH push/pull transfers. I find them very CU like in their behavior.

I'll add this thread to the FAQ (2nd post in sticky).

The CD rates at my credit union have recently changed where the 3yr. CD rates went .25% higher (finally!!), although the 1 yr. CD rates went down by .48%. Anyone else noticed a diverging rate trend, where short term rates are going down, but longer term rates are going up? Is this a sign that interest rates are heading up in the future? Prior to this both 1yr. and 3yr. rates consistently headed south in tandem. How are your CD rates moving?

Has anyone gone through their CU for a mortgage? I will be looking for a first home mortgage soon and was curious if the CU had any advantages(i.e. better rates, lower closing costs, etc..)

Tooshy wrote

<< I would never close my CU account because of any inconvenience because once you do, you lose your right to rejoin if you are no longer in the FOM. >>

This is an important point. See membership policy of Navy Federal Credit Union

<< Once a member of Navy Federal, you are entitled to use the services of your credit union for life. You can leave the military, change duty station or employers, move, retire, get married. Your Navy Federal membership is a foundation that can last a lifetime. Once a member, always a member. To keep your membership active, you must:
Maintain a Share Savings balance of $50 or more, or
Maintain an active Sharechek, Share Certificate, or Individual Retirement Account (IRA), or
Maintain an active loan account (e.g.,paying on an outstanding balance or vehicle lease) as a borrower, or
Maintain a Navy Federal Visa or Mastercard
Remember, if you close your account, you cannot reopen it unless you are still in or return to our field of membership.
>>


My CU's new car loan procedure was very streamlined, customer friendly. Instead of going in and spending all day waiting to see a loan officer, applied on-line and got e-mail confirmation in a couple days. Picked-up an instruction sheet and a fill-in-the-blank loan check good for up to 60 days with a not to exceed max approved loan amount. Just took it with me while shopping for cars. After negotiating the deal, filled in vehicle information on the check, the amount, and signed front/back. They will mail me the promissary note. New car loan rate is only 2.9% fixed for 3 year term. YMMV.

BTW: Took the dealer's rebate cash vice their 0% loan offer. Thousands in rebates versus hundreds in interest. A real no-brainer.

BBTW: No reason to redeem SBs earning from 4-7% when CU is loaning $$ at 2.9%!

Justalil remarked

<< New car loan rate is only 2.9% fixed for 3 year term. YMMV......No reason to redeem SBs earning from 4-7% when CU is loaning $$ at 2.9%! >>

There are some phenomenal CU car loan deals. You were savvy to take the huge manufacturer cash rebate instead of the "0% financing".

Blueyale wrote:

<< I frickin love my local CU and use it for local banking needs to deposit cash and checks. My CU also has one of those coin star machines which is the bomb. >>

CUs offer individuals more banking value for the dollar than banks. CU members' savings deposits and loans aren't subsidizing obese executive salaries, high-risk loans to the Argentine government, excessive lines of credit to Enron Corporation, and similar boondoggles.

CUs are a refreshingly alternative to banks for real people from all walks of life. Enjoy the updated FAQ and links!

Austex wrote

<< Some CU's may bend the rules to qualify you as a member. I called the "Smallville Credit Union" in a nearby suburb of "Smallville" to ask what their membership requirements were. "Do you live in Smallville?" "No, I don't." "Do you have any family members who live in Smallville? Don't you have a brother who lives here?" "No, I don't." Then she very deliberately repeated the question, "Don't you have a brother who lives in Smallville?" >>

Also check out theNCUA Searchable Credit Union Database

vwvr7vw said:

<< Has anyone gone through their CU for a mortgage? I will be looking for a first home mortgage soon and was curious if the CU had any advantages(i.e. better rates, lower closing costs, etc..) >>



We had a first mortgage with our credit union about 15 years ago at a competitive rate, around 9% back then. They do not charge extra fees servicing the mortgage, so if their rates are competitive, I would definitely go with them. Remember they are nonprofit and service oriented which is why I like to do business with them, from simple phone calls, etc. I just trust them more.

tooshy wrote:

<< Remember they are nonprofit and service oriented which is why I like to do business with them, from simple phone calls, etc. I just trust them more. >>

The more threads I have reviewed here on FatWallet, the more I realize CUs have been overlooked as a dependable financial resource by many (myself included).

The American Bankers Association is actively lobbying Congress and State Legislatures to repeal credit unions' "unfair" tax-exempt status and exemption from some bank regulations. The ABA and its allies are arguing to revenue-starved legislative bodies that CUs' tax exemptions are particularly unfair to other taxpayers during this time of declining state/local tax receipts.

If you are a CU member, you should be aware of the ABA's organized lobbying on these complaints:
Credit Union Competition
Background, Recent Legislation, and ABA Position
History of CU Expansion
Utah Taxpayers Association opposition to CU tax exemption
"Changing Face of Credit Unions"
Credit Unions Expand Commercial Customer Presence
Credit Unions Membership in the Federal Home Loan Bank System
Credit Unions Are A Mature Industry
Credit Union Subsidies Foster Inefficiency
Are Credit Unions Serving Their Members Well?
Wolves Dressed in Sheep's Clothing
Taxation Without Extinction

Skipping 14 Messages...
bbexpress said: [Q]They said $25 charge per transaction for wire transfer, that mean everytime I want to buy USSaving Bonds or deposit to INGDirect account I have to pay this fee.

You don't need to wire money to ING Direct. You can pull FROM ING instead via ACH (free).



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