More advanced services
make it easier to switch to a credit union
Last of a five-part series: Credit Unions
By Michelle Samaad • Bankrate.com

Joe Account Holder at Mega Bank U.S.A. is fed up with fees.

So, after comparing Mega Bank's rates on credit cards, auto loans and mortgages with those at his community credit union -- not to mention that free checking account at the credit union -- he's ready to close his bank accounts.

Not so fast, Joe

Joe may want to find out if he's even eligible to join that friendly credit union down the street. His chances are good if it's a community credit union and better if his employer is a select employee group -- a group that doesn't have the required 500 persons to start a credit union on its own. Of course, if his employer has its own credit union, Joe can move right in.

Working around lack of ATMs
But first, Joe may have to give up having access to the many Mega Bank automated teller machines. While a number of credit unions are forming no-surcharge ATM alliances with small banks, they still can't compete with large banks that can offer networks of ATMs from coast to coast.

But when it comes to most other advanced banking features, credit unions are offering more and more of the fancy stuff to their members, from online banking to small-business loans.

Beyond plain-vanilla services such as low-cost or free checking, high rates on savings accounts, certificates of deposits and money market accounts, credit unions are venturing on to the Internet to offer online brokerage services, tax preparation or online banking and bill payment.

Forty-two percent of all credit unions say they're using the Internet to make consumer loans, according to a recent survey by Credit Union Lending Strategies. Only 8 percent complete actual loan closings over the web, though. Roughly 87 percent of all credit unions have a Web site. Likewise, a number of them offer online stock quotes and brokerage services.

"Credit unions respond to the request of their members," says Greg Ford, an Internet consultant with the Credit Union National Association Mutual Group, a company that provides insurance and financial services to credit unions and their members based in Madison, Wis. "Producing a Web site that offers diverse online services was one request credit unions quickly acted upon, discovering overwhelming success."

Given the success of online technology and low rates, what else should Joe Account Holder consider before shifting his money to a credit union?

Help for first-time home buyers
If he's a first-time home shopper, he may have a better chance of getting a mortgage approved and a better deal.

"There's not a lot of the junk fees and garbage fees you tend to find with traditional lenders," says Tracy Hoesly of the credit union mutual group. Because many credit unions are employment-based, Hoesly says they usually have "a better understanding of your job situation than any unaffiliated lender."

Also, if a member of Joe's family -- say, an aunt -- has been an active member of the credit union for some time, it may weigh in his favor come loan approval time. Unlike most banks, some credit unions will look beyond complicated credit scoring systems.

Credit unions across the country have been aggressively expanding their offerings of first mortgages and home equity lines. During the first nine months of 1998 alone, outstanding balances on credit union mortgage loans jumped by 14.2 percent and now exceed $51 billion.

Still, the numbers aren't overwhelming: In 1997, only 6 percent of the nation's 74 million credit union members financed their homes through their credit unions.

Hoesly says there a number of reasons for the dismal numbers: real estate agents rarely recommend that buyers check with their credit unions, so they are easily overlooked; credit unions normally don't employ a stable of loan officers who beat the bushes for business and, perhaps the biggest drawback is simply a lack of knowledge on the part of members.

"It's a tough hill to climb," Hoesly says, "but a number of credit unions are coming together and working very hard to become the preferred mortgage lender for their members."

Loans and leasing for small businesses, too
If Joe is considering starting his own business, a credit union may be a good choice. Many grant loans to members for business or agricultural purposes, according to CUNA. The loans represent only 0.8 percent of total credit union assets. Members needing financing can get it for items such as office equipment and trucks. Some credit unions even lease these items as part of a small-business loan package.

"Considering that mergers are likely to diminish the loans available at banks, small businesses need the credit-union option to have access to affordable credit," says Patrick S. Jury, vice president of the Iowa Credit Union League in West Des Moines.

In another effort to compete with large banks, some credit unions are sharing their services with outside members. Say Joe is traveling to another state. He may want to check with his home state's credit union league to find out if there's a network of credit unions that will take him in.

For instance, the Credit Union Service Network, based in Hightstown, N.J., consists of 38 New Jersey credit unions that will allow visiting members to perform in-house cash withdrawals, secure loans over the Internet and use their ATMs.

"Because of limited locations and business hours, the mega-banks were able to draw business away from us," says Rick Scali, president of the network. "With shared branching, the credit unions present themselves as more than just a place for employee savings accounts -- we're convenient with higher savings rates, low loan rates and low fees."

In addition to credit union members being able to perform over-the-counter transactions at the New Jersey locations, they will automatically be able to perform transactions at 256 other shared branch locations nationwide.

Finally, in strong financial times, credit unions reward members with dividends on certain accounts and cash bonuses. Credit unions that meet their targets for building financial reserves can choose ways to reward members with improved pricing. Some credit unions offer slightly lower loan rates and modestly higher savings rates. Others offer bonus dividends or interest rebates.

Fighting off the mega-bank "carpetbaggers"
Even if Joe Account Holder sticks with his bank, if there are credit unions in the area he probably can count on them to keep the big banks competitive on their fees.

Citizens Equity Federal Credit Union in Peoria, Ill., took advantage of a number of bank mergers last year by running advertisements in local newspapers asking "Puzzled about where local jobs & money are going?" and warning, "News Flash: Another bank buyout sends local jobs & money to Memphis!"

"We call them carpetbaggers -- we hit that pretty hard," says John T. Siefken, Citizens' president and chief executive, of the outside banks. "We make a point that wouldn't you rather do business with the local folks?"

Citizens is one the largest credit unions in the nation, with more than 200,000 members and $1.7 billion in assets

Candence Jackson, a teacher and high school basketball coach has been with her credit union, Dade County School Employees Federal Credit Union in Miami for two years. Before the switch, she did her banking at First Union.

"We get so used to dealing with banks but when my bank merged and it started charging me to cash my First Union paycheck -- that was the end of our relationship."

Fed up with fees, she read the credit union's brochure from "cover to cover" and was amazed at the low credit card rates. She recently secured a home equity loan to upgrade all of the windows in her house.

"I've never looked back," Jackson says.

-- Posted: April 9, 1999