Do you ever find yourself yearning for the kind of service you got at the financial institutions of your youth? Do you miss the personal attention, local focus and less frequent fees that characterized those long-ago institutions?
You may be able to find these qualities again, at your local credit union.
A credit union is a not-for-profit financial cooperative owned by its members, explains Mike Schenk, an economist with the Credit Union National Association & Affiliates (CUNA), in Washington D.C. Credit unions generally deliver the same products as banks do. But because their financial structures are different from banks, their profits are passed along to members rather than to shareholders, as they would be in larger banks.
"What that means is, on average, credit unions are a better deal than banks," Schenk asserts. "Credit unions have higher savings yields. They have lower average loan interest rates. And they charge fewer and lower fees."
How do these benefits pay off for members? Let's take a look at an example. According to Informa, the average current rate on a five-year new car loan at credit unions is 3.1 percent, while the average five-year car loan at banks is 4.61 percent. Applying those rates to a $30,000 car loan over five years, the average credit union member would save $250 per year, or $1,225 over the life of that five-year car loan, Schenk says.
Credit unions' advantages go beyond dollars and cents, however. According to Greg McBride, North Palm Beach, a senior financial analyst with Bankrate.com, a personal finance website that tracks financial institutions, credit unions "offer more of a personal feel. Most are very, very small . . . It's likely they're going to know you, and you will know them."
Open to everyone
It used to be difficult to join a credit union. "There were a bunch of barriers in place (mandating) credit unions have very narrow fields of membership. That meant they could not serve many people," Schenk says. "But that all began to change, starting in the 1980s. Because of the changes that took place, just about anyone can now join a credit union. Many of the barriers have come down."
CUNA's website, www.aSmarterChoice.org, allows consumers to find nearby credit unions, and learn about the products and services offered by those credit unions. Unless you are in a credit union restricted to employees of your company or occupation, the choice of a credit union "almost always comes down to convenience, often defined as a branch near home or work," Schenk says.
Many credit unions participate in a shared branching network that gives members access to credit union locations in all 50 states. Credit unions also offer access to thousands of free ATMs nationwide, including at key 7-Eleven locations across the U.S., according to Patricia Briotta, public relations manager for the National Association of Federal Credit Unions. Participating credit unions can also be found at this organization's website, www.CULookup.com.
It's the fear they won't be able to use ATMs as a credit union member that holds some back from joining credit unions. But Schenk confirms this issue shouldn't be a concern. "One of the really neat things about credit unions is because we're cooperatives, we cooperate a lot more," he says. "One way we do is by offering access to broad ATM networks. One network in particular has more than 25,000 ATMs that members can access without a fee."
Attractive to older adults
A number of factors make credit unions a good choice for older adults.
• Financial advantages. "We've just come through this terrible economic crisis, so finances matter, and matter a lot," Schenk says.
"The value proposition is very important."
When the higher yields on savings accounts, lower interest rates on loans and fewer and lower fees are all taken into account, it is estimated in 2011 alone, U.S. consumers saved a total of $6.3 billion as credit union members, he says.
Credit unions offer checking accounts like banks do, and 80 percent offer at least one free checking account with no minimum balance requirement and no maintenance or security fee, he adds. Moreover, fees on bank checking accounts on average tend to be more than twice as high as fees levied by credit unions, Schenk says, citing a research study by professors Victor Stango of the University of California Davis Graduate School of Management, and Jonathan Zinman, of the Department of Economics at Dartmouth College.
• Help for savers.
Though it is reserved for current and retired policemen and their families, the 74-year-old Chicago Patrolmen's Federal Credit Union is typical of many credit unions, including those open to all, says Scott Arney, CEO.
"About nine out of 10 people who are savers here are 55 and older," he says, adding those 55 and older are eligible for enhanced rates of at least an extra quarter and up to 50 basis points on CDs and IRAs at the credit union.
In addition, the Chicago Patrolmen's Federal Credit Union, like others, offers financial planning help, and free educational opportunities.
"We will very routinely put on various financial related seminars," he says.
"We will either have our own employees who are experts, or we'll bring in experts from outside, to speak to our members. I think there's that old belief that credit unions are just those sleepy, out-of-the-way places. In fact, any financial need you may have can be addressed at a credit union."
• Old-fashioned service. According to Schenk, various surveys indicate credit union service greatly exceeds that of banks. That could influence older folks who remember higher service levels at neighborhood financial institutions.
"We tend to be smaller institutions, very community focused, and able to keep our fingers on the pulse of what our members think and want from a financial and service perspective," Schenk says. "As a credit union lending officer, I'm going to be much more likely to listen to your story, and not be as beholden to lending standards handed down from on high."