Saving Money With Credit Unions
May 5, 2008, 4:20 pm
How credit unions can help you build a better financial life.
Wouldn't it be great if all the companies you did business with as a consumer were to drastically cut their prices, and completely forgo their profits? Imagine how much money you'd save buying a car. Or paying the electric bill. Or going to the grocery store. Or shopping at the mall.
Imagine how much you would save on bank fees for your checking account and other transactions. Too bad these things only happen in fantasy land, right?
Actually, you can do your banking without contributing to the profits of your local bank, and save quite a bit of money in the process, by banking at a credit union. Technically, a credit union is a non-profit organization that serves the financial and banking needs of its members by providing checking, savings, loans and other services. And while these services are available only to members of the credit union, most people will find that they're eligible if they check around a little.
Credit union members save money in various ways, primarily by not paying monthly charges or per-check fees on their checking, or "share draft," accounts. As an added convenience, the absence of a monthly fee also means you don't have to maintain a minimum monthly balance.
Other savings include the interest on many kinds of consumer loans, such as auto loans, personal loans and credit cards. In fact, for any type of financing, credit union members should always check their credit union first, before taking a loan out with a regular bank. For example, if you're shopping for a car, apply for the loan before you actually go to the dealership. Having that pre-approval in hand gives you a lot of leverage in negotiating the best price you can because the salesman has to deal in terms of the car's total price, not the monthly payments.
You'll also likely save money on the interest rate on your credit card, if your credit union offers them. A great way to build credit through a secured card, in which you secure the balance of the card with a savings account, is to apply through a credit union. Typically, their secured credit cards don't have the exorbitant interest rates and fees found with other secured cards.
Even with all these savings, however, there are some disadvantages to credit unions. For starters, they tend to have fewer branches, which can be inconvenient if you have business that has to be done in person. Also, most have less convenient hours and don't open for business on Saturdays. Although, with larger credit unions, you may find more branches and more convenient hours.
Also, credit unions, because they are smaller and have fewer assets than large banks, are less likely to approve your loan application if you have blemishes on your
credit record. Proportionately, defaulting on a $15,000 auto loan is a lot less damaging to a large bank with billions of dollars in assets than it is to a small credit union with a few million.
Overall, a credit union is a great way to handle banking needs that are simple and straightforward, which is what most of us need. For you high rollers out there, though, you may find that your account is better handled at a commercial bank, especially if it requires a lot of hands-on service.
