If you’ve been following this blog, you may have suddenly realized that you want everyone in your family to become member-owners of the USC Credit Union. However, they might also be hesitant to make the switch. The process of closing one account and opening another appears daunting, but it is actually very easy! If you want to share the joy of lower fees, greater accessibility, and better resources with a loved one, just send this blog their way to clarify the process.
Credit unions have become more competitive with the nation's banks. They can open accounts for almost anyone, even businesses, write mortgage loans, and generally provide any basic banking service that for-profit banks can.
And over time, credit unions have become fiercely competitive. Their not-for-profit status allows them to operate without a goal of profitability. Their tax-free status means they don't have a huge expense that taxed, for-profit banks have to pass on to their customers. Without the need to generate a profit, or pay taxes, credit unions have a massive advantage on the banks -- an advantage that can benefit the customer.
Borrowers win at credit unions
Data compiled by SNL Financial and the National Credit Union Administration suggest that credit unions offer lending rates that are on par or better than the nation's banks. The average credit union prices its credit cards, car loans, and mortgages at rates lower than the average for-profit banking institution, in part due to the efficiency of a not-for-profit business model.
You'll notice car buyers are perhaps the biggest winner at credit unions, which price car loans at nearly half the rate of for-profit banks. This is nothing new. Going back several years in the data, I found credit unions have historically priced their car loans at a 1.5%-2% discount to loans from the average banking institution.
The difference is so substantial that individuals with an auto loan at a for-profit bank might want to consider refinancing their loan at a credit union. The savings can add up to thousands of dollars over the life of the loan.
Credit unions are more conservative in how they manage their assets and liabilities, and thus prefer the short amortization period of car loans. Whereas a 30-year mortgage carries the risk of rising interest rates over the life of the loan, a car loan can be easily matched with certificates of deposits, for instance. Credit unions will compete aggressively for car loans, but largely match the banks' rates on mortgages, which are longer-term loans by their nature, and less preferable to credit unions because of their longer duration.
How credit unions stack up for savers
Savers fare better at credit unions across the board. The average credit union offers CD, money market, and savings rates well above the national average for banking rates. The disparity is most dramatic for longer-term savings vehicles such as certificates of deposit, where credit unions pay nearly 50% more on five-year CDs than banks.
This is, again, partly due to conservatism in how credit unions structure their assets and liabilities. Credit unions want longer-term deposits to reduce their interest rate risk. Banks have more fee revenue than credit unions, which acts as a form of insulation from the swings in interest rates.
Speaking of fees, the chart above doesn't reflect the common bank service charges that you won't find at a credit union. Following a reduction in fees banks earn on debit cards, banks created account maintenance fees to offset their lucrative debit card revenue. The result is a monthly charge for accounts that do not maintain a minimum balance.
Credit unions, formed for the purpose of helping low- and middle-income Americans create savings, have largely avoided monthly account fees for their customers.
If, like many people, you made a financial New Year's resolution, you might just want to start by picking a new place to store your savings and borrow your money. The average credit union has a huge advantage on your average bank. This year is the perfect year to make the switch.
The $18 million fortune about to be ripped from your credit card
Bad news for your credit card company. The plastic in your wallet may soon be gone forever. And once it is, it could cost Capital One, American Express, Chase, and all the rest as much as $18 million a day! Good news for you. Because when you're finally able to say "goodbye" to the cards stuck in your wallet, a little-known tech company responsible for finally putting an end to plastic could hand its investors life-changing profits. A revealing investor alert from The Motley Fool has the full story.
Source: Wathen, Jordan. "Why 2015 Is the Year to Switch to a Credit Union." N.p., 7 Feb. 2015. Web. 19 Feb. 2015.
Don’t worry – this isn’t going to be one of those posts that tell you you’re a big boy/girl now, and have to stop being irresponsible with money.
I won’t tell you to stop buying overpriced lattes, $11 nachos at midnight, or comfy college sweatshirts because those things are largely what college is all about.
What I will tell you is that the post-college years can really stink when you’re broke. Actually, worse than broke — so far in debt that you feel like you’re working for nothing but your bills.
So here’s how to give your future finances a fighting chance, and get through college without making those clichéd money mistakes of running up credit card debt and blowing through all the summer job money you earned folding shirts at The Gap…
Learn to beat the system
You don’t have to follow the “rules” at college when it comes to spending money. For starters, don’t buy your textbooks in the school bookstore. Don’t pay for the meal plan (unless you actually think you’ll like/eat the food). And avoid joining clubs and organizations that are notorious for spending a ton of money, and expect you to do the same. Here’s what to do instead:
- Consider textbook rental services like Chegg.com or see if there’s a digital copy of the text available. Ask around or Google for people who might be selling those same books used for a fraction of the price.
- On the food tip, set some limits and boundaries for yourself and stick with them. If you must have your Chai Tea and Friday night pizza, have it, but make it a rule that you’ll prep your own meals/snacks on most days. And when it comes to grocery shopping, it’s a good idea to channel your mom and start paying attention to sales, coupons, and adding those loyalty cards to your keychain. Dorky, yes, but those savings add up.
- As long as we’re talking coupons, if you’re not signed up for Groupon and LivingSocial alerts for your college town, you’re missing out on discounts at local restaurants, salons, and other budget-draining activities. Repeat after me: Paying full price is for suckers.
- Don’t join any frats or clubs right away. Meet people, hang out with them, go to their parties, and then pick which ones are worth a real investment of your time (and money).
There are now 100 million credit union members across the U.S., the Credit Union National Association announced Tuesday. Combined, credit unions have $1.1 trillion in assets. And credit unions are attracting millennials at a rapid pace, which is good news for the future.
But even if they are no longer a tiny corner of the banking universe, credit unions remain small when compared to commercial banks, which hold $14.8 trillion in assets. Despite their rapid growth, credit unions still represent only 7.4 percent of banking assets. To put things in perspective, JP Morgan Chase (JPM) and Bank of America (BAC) have combined assets of $4.5 trillion: two banks have four times the assets of all the nation's credit unions combined.