FW Finance FAQ: Credit Unions

FAQ-related threads:

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 relatives’ 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.

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.

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?"

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.

now i see there are deals like these available

http://www.fatwallet.com/forums/messageview.cfm?catid=52&threadid=171389

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

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.

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

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

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

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.

Links are in main post.

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. >>

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.

Has anyone here had negative experiences with CUs?

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?

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. >>

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".

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

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).

bbexpress said: 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).