Own your own bank -- join a credit
One in every three Americans belongs to a credit union
-- that's more than 79 million people who belong to one of 10,000
credit unions with more than $480 billion in collective assets.
So what do they know that you don't know?
"When it comes to personal attention, high-quality
service and low fees, credit unions continue to knock the socks
off other providers in the financial services marketplace,"
says Daniel A. Mica, president and CEO of Credit Union National
Association. Americans seem to agree. Credit unions have topped
the consumer satisfaction ratings in American Banker's annual survey
for 12 years in a row.
Arthur Bullard agrees. Bullard joined First Choice
Credit Union in West Palm Beach, Fla., when he first started working
at the post office. Thirty-three years later, he's still a member.
"Personal touch is everything to me," says
Bullard. He's been so happy with his service over the years that
he's recruited several of his friends and family members to join.
He says the employees at First Choice are the reason for his enthusiasm.
"They make you feel that they are there to get you a better
deal," Bullard says.
In the beginning -- a problem
The first American credit union was founded in 1909 in Manchester,
N.H. Credit unions have prospered since then, but their popularity
was limited due to convenience -- they couldn't offer as many branch
locations, and, in more recent times, as many automated teller machines
as the bigger banks.
With the dawn of online banking, all that has changed.
Access to a credit union is now as convenient as the nearest computer.
Credit unions have started to solve the lack-of-ATM
problem by joining networks. While paying a non-credit-union service
charge at ATMs was a problem in the past for USAA Federal Credit
Union members, they can now use any of 101,000 Pulse ATMs across
the country free of charge.
Bullard says his credit union is actually more convenient
than traditional banks. "You get business done a lot quicker
and you get better rates," says Bullard, citing a CD he recently
purchased at 4 percent.
Bucks get bigger
Because credit unions are nonprofit, they can offer lower rates
for loans and lower fees overall.
"Typically, we see what banks are doing and we
try to do a little bit better," says Michael Welte, President
and CEO of First Choice Credit Union.
This puts banks, which have to pay profits to stockholders,
at a disadvantage. Instead of paying stockholders, credit unions
return earnings to their members in the form of dividends or improved
services. Lower overhead means lower rates.
"The single biggest difference between a bank
and a credit union is the ownership structure," says Welte.
"Banks are either privately owned or public companies. Therefore,
their primary function is to earn profits for their owners. (In
credit unions) net income is earned only to the extent necessary
to build sufficient capital reserves. Earnings over and above this
are returned to members through adjustments to loan and savings
rates or expansion of services."
"It's in a person's best interest to join a credit
union," says Welte. "They get a better overall financial
deal than from a bank." Currently, the better deal at Welte's
credit union is on Gold credit cards. First Choice's going APR is
10.90 percent. Compare that to the national average of 14.71 percent.
For those who carry a balance on their cards, that's quite a bit
"People are worth more than their money at credit
unions," says Mica. And their money is worth more at their
credit unions than at a traditional bank.
Over the years, credit unions have consistently charged
lower rates for loans and credit cards and been more lenient with
fees and penalties. For example, if you were shopping for a new
car loan, you would pay no fees at Greater Texas Federal Credit
Union, Pentagon Federal Credit Union, San Antonio Teachers Credit
Union and Provident Central Credit Union.
Bullard says his credit union has saved him a lot
of money in the past 33 years. When he was buying a car, they helped
him research his deal to make sure he got the best offer available.
When he wanted to refinance his mortgage, "They told me about
options I didn't even know of. They give advice to save you money."
Bullard cited one more reason he is so dedicated to
his credit union -- security.
"They know my name and face," he says. "If
someone came up to the counter and said they were me, had my personal
information and wanted to get my money, the teller would know 'That's
not Mr. Bullard.'" Bullard says he knows there are other security
measures in place, but he feels safer knowing that the tellers know
So what's the catch?
Ah, yes -- there's always a catch. To join a credit union, you must
be eligible for membership. Luckily, there are so many credit unions
from which to pick, almost anyone is eligible for at least one.
Membership requirements range from military service to place of
employment and school attended to current place of residence. You
can find the right credit union for you at the National
Credit Union Administration Web site.
If all else fails (and it really shouldn't), you can
learn how to start your own credit union by reading Bankrate.com's
steps to starting your own credit union.
| Rate comparison:
Banks vs. credit unions
from Dec. 23, 2002 to Jan. 23, 2003
|Fixed-rate credit card
|Variable-rate credit card
|Money market yield
|6-month CD yield
|1-year CD yield
|2.5-year CD yield
|5-year CD yield
-- Updated: Jan. 29, 2003