Credit unions can be a viable alternative to banks as long as you meet certain conditions. In general, unions can perform many of the same services that banks perform, but there can be exceptions to this.
Credit unions are member organizations and this is the biggest difference between them and banks. When you join a union you, in essence, become a stakeholder in the institution. In the past, most credit unions were formed around certain professions or formed around certain employment bonds. Today, much of that has changed. The union is still a membership process but the bond can be anything from regional to religious. Many different types of groups now have their own credit unions, and finding one that you can join has never been easier.
According to the Credit Union National Association there are over eighty million Americans currently enrolled in credit unions. This huge number of participants is not a fluke. There are reasons why people choose unions over banks.
One thing you may notice about credit unions is that they do not advertise themselves very much. If you want to find a union that you may be eligible to join, you have to look for it.
The best place to begin looking is with your employer. There are many employers who have their own credit union or have access to one. This can be especially true if you work in a union or if you belong to a particular trade association.
The Credit Union National Association's website has a very useful locator that can help you find unions through an online search. You can use this search engine to help narrow down possible institutions that are in your area or that belong to certain trade associations. Once you find some suitable selections, you can visit their websites to see if you meet their requirements.
Some religious organizations have unions set up for members of their faith. These are usually not administered by the local church, synagogue, or mosque but rather by the larger regional or national headquarters of the faith. In addition to many religious-based credit unions, there are also civic institutions that have credit unions.
Many universities and colleges have unions that are available not only for faculty but for students as well. Student unions are often more geared up to help with the special needs of students than local banks might be.
It is not often well known but many credit unions will allow family members of an already enrolled member to join. In other words, if your father is a member of a particular union, you may be able to join too simply because you are his child. This is not the case with all credit unions, but it is the case with many and it is worth asking about.
While credit unions can be useful for many people, they can also be limited in what they can do. Much of what a union can do for you will be determined by how many members it has. This can come into play if you are looking for home loans or other big dollar loans. Smaller credit unions may not be able to meet these types of needs, in which case dealing with a bank would be the better choice.
You might have grown tired with paying huge bank rates for your loans. Well, now you have a better alternative, because you can join a federal credit union and you can be sure that you will make economical deals. By choosing Navy Federal Credit Union, you will be a member of the largest credit union in the world and you will be able to have the same benefits as 2.4 million members already have. If you are wondering about the differences between a traditional bank and our federal credit union, you should know that the latter is a non-profit financial institution. A bank will give you a loan and it will charge you more, because the owners of the banks need to make profit. When joining a credit union you practically become one of the owners, so you will receive help, but you also help other people.
The foundation of Navy Federal Credit Union started in 1933 in the context of some rough economic times. It was then when seven civilian Navy employees decided to create a kind of saving club by pledging $10 each once at two weeks. Since then, the federal credit union they started has been growing into the largest credit unions in the world with assets of 25 billion dollars. Now you can be one of its members and have the same incredible benefits as the other 2.4 million members. You are eligible even if you have no association with the military, and your family members will be able to join too. In case you are in the military, there is no better place for you than the Navy Federal Credit Union. This financial institution wants to help its members, not to make profits from your needs as a citizen. In addition, if you are eligible to get in, why should you not take that chance?
One of the benefits offered to you by the Navy Federal Credit Union is that you can attend seminaries that will teach you everything about the process of buying a house. You can learn important information about this subject, because there are many formalities when trying to buy a property and you will receive help to get over them very easy. This seminar is completely free, so you do not have to pay any money for it. Moreover, after attending it, you will benefit from a $250 coupon, money that you can use as a fee for a mortgage loan application, in case you decide to buy a house for you and your family in six months after taking these “courses”. In case you already have a home, our federal credit union gives you the opportunity to attend other economic seminars that will increase your awareness as to the economic situations in your life.
Some other possible seminars you can attend will teach you everything about retirement, planning or minimizing the tax bite or will help you find the long-term care you need for a member of your family. As long as the Navy Federal Credit Union is a non-profit organization, you can be sure that we will only provide you the information you need and we will not try to convince to buy something you might not need or pay for some useless services. The purpose of a federal credit union is to be helpful, not to get benefits from you. This credit union is here to assist you at all the stages of your life and in many different areas that you might consider difficult.
In case you are in the military, there are special services the Navy Federal Credit Union offers because they concern your carrier. You can learn from us what to do before deployment and the information you and your family will get will help you handle deposits and payments automatically. We even give you the possibility to access your federal credit union from any naval installation. Moreover, in case of disability or death, your family will receive support, so that your family members should get easier over the moments of crises.
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A credit union is a non-profit financial organization that is owned and regulated by its members through a representative electoral board of directors nominated from the membership itself. A member of a credit union can deposit or withdraw the money from the credit union.
The difference between a conventional institution like a loan corporation or a bank and a credit union lies in the fact that members are in fact the owners of the organization. The credit union also deals in the same spectrum of services which other financial organizations like banks offer, like share certificates, savings accounts, credit cards etc. Being a co-operative institution, it works towards the mutual interest of its owner members by charging a low rate of interest on loans and giving a high rate of interest as dividends on shares invested. The profit conscious organizations are at loggerheads with credit unions because the earnings for credit unions are tax-free. In fact the American Bankers Association made withdrawal of the tax-free benefits to credit unions as its moot point for the last two years.
There are about 11000 credit unions in the United State. St. Mary's Bank Credit Union is the first credit union established in the United States and is presently situated in Manchester, NH. Massachusetts was the first state to pass a credit union law. Edward Filene, a department store tycoon is hailed as the father of credit unions in the United States. Initially credit unions were viewed as the lone savior for those who could not get credit or could not qualify for credit. The popularity of credit unions grew and in the year 1934, there was a genuine need to give different credit unions an industry status. In the same year, in Estes Park, Colorado, a conference was held to conceptualize the establishment of the Credit Union National Extension (CUNA). Dora Maxwell and Louise Herring, the mother of credit unions are two ladies who are known to have made it their life time mission to trigger the growth of successful credit union across the face of the entire nation.
There are Federal credit unions which are licensed or chartered under the authority of the National Credit Union administration. These Federal credit unions ensure that their members share accounts through the National Credit Union Share Insurance Fund (NCUSIF) for the security and safety of the credit union. Similarly there are state credit unions that have credit unions in the state that choose to insure their assets either through the NCUSIF or the American State Insurance.
In Raleigh, North Carolina, new homeowners John and Jennifer Hall made a smart decision: instead of choosing a risky mortgage scheme from a bank — a decision that has been catastrophic for so many of their contemporaries, the couple applied for a loan through the North Carolina State Employees’ Credit Union (SECU).
The couple did their homework, and concluded that it made better sense to work with a non-profit financial cooperative to purchase their first home. Aside from lower fees and closing costs, SECU did something the others didn't: a credit-union employee sat down with the couple to explain the pros and cons of the various mortgage options. Because credit union employees are non-commissioned, there was no pressure, enabling the couple to see the credit union as a trusted advisor.
"There are so many young folks who don't realize the advantage of going with a co-op," says John, who believes that all North Carolinians benefit from non-profit financial cooperatives that help to keep other financial institutions in check by ensuring citizens remain eligible for competitive rates and fees. "Being a member can make a tremendous difference in your financial life!"
You Belong
Are you are frustrated with your bank? You may be tired of paying endless fees, high interest rates and receiving poor customer service. And in light of the current financial crisis, you may find yourself among those with good credit experiencing trouble getting a car or home loan, the result of tightened lending standards due to the banking industry’s own.
Fortunately, you have options.
Credit unions offer are a fresh alternative to corporate banks while providing the same kinds of services. As a credit union member, you can open a checking or savings account, buy a certificate of deposit and get a loan. Some credit unions can even help invest for your retirement or take financial planning courses before you buy your first home.
Credit unions are co-operative businesses, owned by members (depositors) who share something in common, such as where they work, live or go to church. Because credit unions tend to be smaller and cater to a select group of people, you can expect a more personal relationship between the staff and the members.
Unlike commercial banks that generate profits for owners and outside shareholders, credit unions channel profits back to members in the form of lower fees, better interest rates and higher dividends. According to the American Banker/Gallup poll, credit unions consistently rank high among consumers for service and customer satisfaction every year since 1983.
Keep Your Money Safe
Credit unions have emerged as a safe haven for consumers. Because credit unions avoided the risky loans and exotic investments that brought down so many banks, they remain relatively untouched by the recent financial crisis, credit union members have peace of mind knowing their money is safe.
Credit unions are financially solid because they stick to conservative banking practices, such as requiring down payments and income verification on mortgage loans. While many banks were chasing ever more exotic ways to make money, credit unions stuck to the basics.
Many people are leery of putting their funds in the hands of a credit union because they believe the credit union isn’t FDIC insured. Nothing could be further from the truth. Like banks and savings institutions, credit unions deposits are insured up to $250,000 by the federal government, providing the same level of protection for investor assets as any banking institution.
Credit Unions Still Lending
Commercial banks have recently curtailed lending, even people with good credit. The result is that many consumers are having trouble getting home and car loans due to tightened lending standards.
This is not the case with credit unions, which continue making loans available to people with good credit histories. In fact, credit unions are now experiencing higher loan volumes as consumers turn to them in greater numbers since the recent banking sector meltdown.
According to the CUNA, credit unions made 36 percent more small business loans in the first half of 2008 than the same period in 2007, a reflection in part of the ability of credit unions to lend while banks horde cash.
Now, as conventional banks avoid lending even to credit worthy buyers, credit unions are poised to take a much larger share of the traditional lending business – including homes, cars and small business loans.
Join a Credit Union Today!
Though once associated with trade unions, hospitals, universities and other large employee groups, credit unions are increasingly open to the general public. There are also “select employee groups” that offer credit union members to a network of affiliated businesses.
You'll find many reasons to join a credit union, including:
As of 2005, there are 9,346 credit unions in the United States, which means that just about any consumer can find a credit union they are eligible to join.
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Young people are attracted to things that are easy, fun and free! An excellent way to boost credit union marketing success is to implement a promotional stunt right in the lobby that will generate a lot of buzz among these younger customers.
Generation Y (consumers age 18-30) is one of the largest demographic groups in the nation with 45 million people. And yet, according to the Credit Union National Association's 2007-2008 Credit Union Environmental Scan Report (E-Scan), credit unions are in the middle of a major decline in the number of members in this demographic.
By utilizing truly unique lobby promotions, a credit union marketing manager has a much better chance at wowing the Gen Y group.
Cash Cube Money Machine
Who wouldn't want to earn the opportunity to grab as much cash and prizes as possible? In order to attract the attention of the Gen Y crowd, a credit union marketing promotion must have a huge wow factor. With hundreds of bills swirling around inside just waiting to be caught by a lucky contestant, a cash cube money machine accomplishes just that.
Credit union marketing managers can offer new customers the opportunity to step into the cash machine to win hundreds or thousands of dollars worth of real cash or custom imprinted vouchers that represent cash or prizes.
Based on the available credit union marketing budget, the cash and prizes contained in the cube can be altered to meet any needs. Prizes may include anything from cash, checking incentives, savings bonds and CD's to pizza coupons and sporting tickets.
Promotional Prize Wheel
A large colorful prize wheel in the lobby is a great visual incentive for new members to join the credit union. Credit union marketing managers can determine the appropriate prize denominations in this promotion as well.
An excellent idea for cross promotion is to use credit union products and services as wheel prizes. By doing so, the promotional prize wheel becomes even more valuable marketing tool - getting people through the door and interested in learning about all the credit union has to offer.
Free Food!
Nothing attracts people more than the prospect of free food. Credit union marketing managers can use this to their advantage by keeping their lobby stocked with goodies. Many credit unions offer coffee and such, but that doesn't really speak to the younger crowd like a cold soda or freshly popped popcorn!
An old-fashioned popcorn machine provides a nice marketing visual - especially with the credit union's name on the side of the machine and/or imprinted on the bags. The cost of producing popcorn is so inexpensive that it is the ideal treat to give away for free as a thank you to all of your customers. Customers appreciate it when the credit union that they trust offers a thoughtful gesture of appreciation.
These days items of not just want, but need, tend to be becoming more and more expensive and with interest rates constantly rising at the banks, credit unions are becoming the more financially attractive alternative.
Credit unions are financial co-operatives owned and controlled by their members who combine savings to offer low-cost and flexible financial products to their members.
Each union has a 'common bond' which determines who can join. A ‘common bond' is simply having something in common with the existing members such as living or working in the same area, work colleagues or people who belong to the same association, such as a church or trade union.
If you are not able to save every week or month or have a poor credit record, a credit union may be more sympathetic to your needs than a larger financial institution would be.
Credit unions welcome irregular savers, and all savers usually get the same percentage dividend on their savings aiming to pay a dividend on savings once a year to all their members. This can be as much as 8% of the amount that people have saved, but is typically 2% or 3% depending on profits.
As mutual societies, credit unions are non-profit organisations and must each year set aside enough money to ensure they remain financially stable. All profits are used to make interest rates as cheap as possible for borrowers and rates of return attractive for savers.
With a credit union you can save as much or as little as you like, weekly, monthly or as often as you wish. You can pay in at convenient local shops or collection points, or direct from your wages.
You do have to prove you can save before you can take out a loan with a credit union. Once you have satisfied this requirement, the total amount you can borrow from your credit union is based on what you will be able to repay. They can also tailor their services to suit your individual circumstances.
The interest a credit union can charge on a loan is limited to 1% a month. So a loan of £100 costs no more than £1 each month in interest.
Typical interest rates for loan repayments are just 6% and members can also automatically have free life insurance.
The main act of Parliament governing credit unions was the Credit Unions Act 1979 until 2002 when the FSA (Financial Services Authority) took over as a regulating body. The FSA sets out the objectives of a credit union stating that credit unions must have their accounts audited annually by a qualified auditor and be insured against fraud or theft.
Credit unions cannot lend all their members' savings or invest the remaining money in risky ventures. Instead they must put it into bank deposit accounts and the most reliable investments, such as government bonds. This enables them to get the money back if they need to.
A few points to keep in mind
You cannot simply join whichever credit union you think is best. You have to meet the common bond requirements yourself, or be a close family relation to someone who does and is already a member.
You cannot join a credit union just to get cheaper loans. You usually have to save with them first. The rules on this vary between credit unions.
You cannot save or borrow in the name of a business you may be running. Only members can borrow from a credit union and borrowing must be in your name even if you want to use the money for a business you run.
Credit unions typically have few branch offices and few, if any, ATMs.
Some credit unions don't return cancelled checks to you.
Your local credit union may not offer you as many services as you can get from the neighborhood bank. Check to see what's offered. You may end up deciding to keep accounts at each, for different purposes.
The UK credit union movement is still relatively small and is restricted by law from gaining size or offering services which could compete with profit-maximising banks.
Check with your local council or citizen's advice bureau for a list of credit unions in your area. If you or your partner is working, the trade's union representative or the people handling the wages should be able to tell you of any credit union's covering the industry.
]]>If you are looking to borrow some money to pay for a dream holiday, buy a car or make some improvements to your house, it's likely that your first port of call in looking for finance will be your bank. After all, you already trust them to look after your money and their current loan rates are good so why go anywhere else?
While it's certainly convenient to approach the bank for a loan, the process of applying for finance can be a rocky road and, at the end of it all, you might find that your income isn't enough to finance the repayments. Similarly, if you've had credit problems in the past it's highly likely that you'll be forced into punitive interest rates or having your application turned down together. If this happens, you might then try your luck with one of the multitude of loan companies who advertise on television and in the press, or found on the internet. However, there is another option that many people don't know exists: the local credit union.
Credit Unions are financial co-operatives owned and controlled by their members. They generally operate in areas where low incomes are common and offer savings and great value loans to customers. Another benefit of Credit Unions is they are local, ethical and know what their members want. Each Credit Union has a 'common bond' which determines who can join. This bond may be for people who live or work in a particular area, work for the same employer or belong to the same association or club, such as a church or trade union.
Credit Unions work by having members pool their savings together, which can then provide a fund from which are made to other members. Borrowers then pay interest on the money loaned to them as they would if the loan had been through a bank. As the money in the fund belongs to individuals, the credit union 'rents' the funds from its savers, who each year receive a dividend from the money they rent to the credit union. As a result, credit unions should offer its savers a good return on the money that is placed in the fund.
In order to operate, a credit union must be successful in attracting a sufficiently large amount of savers to enable it to hold sufficient liquidity to enable it to meet members' requests for loans, share withdrawals and overheads. Furthermore, dividend payments to savers and the credit union’s operating costs have to be met out of the credit union’s profits, so a strong fund is essential for the credit union's success. As the main source of income for a credit union comes from the interest charged on members' loans, it is very important that the credit union be proactive in marketing the benefits and availability of their services.
For peace of mind, credit unions have to be registered and regulated by the Financial Services Authority, who also regulates banks, building societies and all other providers of financial services in Britain. Furthermore saving members of credit unions are protected by the Financial Services and Compensation Scheme (FSCS), who provide a safety net for customers of financial firms in the event of the firm going out of business.
When looking for finance, it is normally good practice to shop around the various resources available to get the best deal on personal loans. For some, this will involve trawling the various banks on the High Street in search of a good rate, while others will turn to the internet and price comparison websites in order to find and compare loan rates. However, bear in mind that if you can't find a deal to suit, or if the bank says 'no' it might be worthwhile having a chat with your local credit union - they might say 'yes'.
When you are on a low income, it is very difficult to get credit. And yet, most of us could not manage certain purchases outright, even if we get a decent wage. This is where the Credit Union offers a real alternative.
Run by a volunteer board of directors which are elected by its members, a Credit Union is basically a financial cooperative, owned and controlled by its members.
They offer affordable loans and encourage members to save. By law, the maximum a Credit Union can charge is 12.7% and this is charged on an ever reducing balance, which means that every week or month, you will pay less and less interest. There are no hidden charges and you will not be penalised for repaying the loan early.
Anyone can join a credit union, as long as they are part of the 'common bond'. This could be people living in a shared area, working for the same employer or belonging to the same association.
So how do you start your own credit union?
The average time it takes to establish a credit union is between one and three years. The minimum number of members required for the initial set up is 21 and the maximum number of members once you are established is limited to just 5,000 people.
After you have secured enough members to start your union, there are a number of tasks which will need to be completed.
• Firstly, decide on a common bond – where your credit union will operate
• Get a group together with the necessary range of skills and experience to develop a successful community business
• Carry out a pledge drive – find out just what demand there is for a credit union in the area you wish to service and use the information obtained to inform your business plan projections
• Join The Association of British Credit Unions (ABCUL) as a Study Group member – for just £35 a year, you get a full manual and access to all of ABCUL's information services
• Discuss and research your plans with the regulators – The Financial Services Authority (FSA) will need to approve your common bond and satisfy itself that your business plan and policies and procedures meet its standards. The FSA website www.fsa.gov.uk gives the regulatory requirements Credit Unions now have to meet to safeguard member's money in the same way as banks and building societies
• Obtain funding & sponsorship -and include the figures in your business plan
• Choose officers – Officers and employees of the credit union will need to obtain ‘Approved Persons Status' from the FSA, and will need training for their roles
• Think about marketing & promotion and how you will meet your business plan targets
• Launch your credit union.
It is also vital to secure sponsorship from local sources, such as employers, housing associations, business groups or councils as setting up your own credit union can initially be an expensive process. ABCUL estimates the costs at between £30,000 and £70,000 in setting up a scheme with premises and staff for the first three years.
Credit unions in the UK are also required to reach a statutory minimum reserve of 10 per cent of aggregate assets to protect their members. Until they reach this level, credit unions should transfer at least 20 per cent of their surplus into reserves each year.
Covering you and your members
In the UK a credit union has to take out insurance to protect its members' funds from fraud and mismanagement. However, there is no industry-wide compensation scheme to protect members' savings should a credit union become bankrupt.
Before you set up your credit union from scratch, consider investigating if credit unions in neighbouring areas would be willing to expand their common bond to your locality or place of employment.
Many credit unions are expanding their common bonds to cover much larger populations, and your area may already be included in someone else's plans. ABCUL can advise you on initiatives happening where you are, and put you in touch with the right people.
To the wider community, a Credit Union improves the general financial knowledge of its member and offers training to its volunteers investing in local money.
It helps restore a sense of pride in disadvantaged and disaffected communities and provides a means of targeting financial exclusion.
For further advice and assistance on setting up your own credit union visit www.abcul.org.