The mortgage loan benefits of credit unions

Image attribution: US-PDGov

While the big bank corporations continue to lumber along with their mantra of "too big to fail" and complaining about the lagging national economy, it's the small community lenders and credit unions that are making efforts to provide mortgage opportunities to the average family buying a home. As a result, these local and community institutions are now representing the best possibility for a home buyer to be approved for a mortgage loan, especially first-time purchasers.

Focused on local service

Credit unions are designed and established to serve and financially help a specific local community group. As a result, many were original established for specific trades or employee groups. However, since those early years in the 1970s and 1980s, many of the same institutions now enjoy looser banking regulations, allowing them to compete directly against banks for the same customer markets. As a result, many can apply to become a member of a credit union in their area without having to be part of the original charter group served.

 

Better positioned to lend

Because credit unions are more conservative in practice than banks, they didn't suffer nearly as bad during the 2008 economic crisis and real estate meltdown. In fact, many credit unions still have many of their mortgage issued during those times alive and well today, still being paid timely. This means that these institutions have far healthier portfolios on their balance sheets and can still generally lend to new customers. They are not burdened by the toxic loans and foreclosure many of the big banks still have on their books.

 

Favor goes to existing members

The above said, credit unions don't just lend to anyone. They tend to favor members who already have accounts with them including checking accounts, savings, CDs, retirement and similar. Where a credit union sees a member is established and a long-term customer, the institution will go out of its way to help on internal loans to that member. Granted, such applicants still have to have a good credit history and rating, and be timely on any other loans that may be outstanding.

 

Better interest rates

Additionally, many credit unions tend to offer lending interest rates that are usually better than what big bank branches offer in the same community. This critical difference can save borrowers approved by their credit union dozens of thousands of dollars over the lifetime of a conventional mortgage.

 

In summary

Where possible, every consumer in the New York-New Jersey area should sign up with New Jersey credit unions, even if just with a simple savings account. By establishing a relationship as a member, a borrower can then take advantage of the services and loan benefits of a given credit union, finding far more reception a loan application versus what the post-real estate crash big banks respond with today.

About the author: Derek is an active finance blogger. He enjoys giving people advice on their financial issues and also doing taxes for multiple people. The article above is for new jersey credit unions.

Reasons to join a credit union

 Image attribution: Kenneth Allen. CC BY-S.A. 2.0

The benefits of joining a credit union are actually quite good because it's like banking with perks. With banks the managerial priority is usually to serve its shareholders by gaining profit from banking services. With credit unions the shareholders are members so the result becomes a more affordable banking experience. Credit Unions often serve their members with free services, lower borrowing costs, higher lending rates, and personalized service.

 • Free online bill pay

Online bill pay is a convenient way to pay bills and saves on stamps, time and gas going to the post office. Many credit unions offer free online bill paying services that allow members to literally pay bills through the credit union. Some bill payer services such as the one available at CINCO Credit Union can also be automated to withdraw a fixed amount of money from a pre-specified account every month as bills become due.  

• Free cashiers checks

Another benefit of banking with some credit unions is free cashiers checks. For those who only require one to three checks a month, this can save the cost and hassle of purchasing and managing a check-book. Cashiers checks are also guaranteed so the payee has greater financial assurance of the payers ability to pay. These types of checks are useful for important purchases such as down-payments, but can also be used for other transactions typically involving checks. The Navy Federal Credit Union is an example of a credit union that not only provides members with free cashiers checks, but also allows them to be ordered online. 

 • Free online banking 

Apart from online bill pay, free online banking allows a credit union member to track and monitor banking transactions easily and affordably. Some credit unions such as NIH Federal Credit Union offer free online financial software, free electronic statements or e-statements and have free  tax preparation software built in. Free online financial software can benefit members with financial planning and secure online financial record-keeping.  

• Lower cost credit cards

Credit cards can be expensive, but they can be less financially costly with no annual fees, lower interest rates and fewer surcharges. Credit unions tend to provide their members with competitive interest rates that are useful for consolidating credit card debt or re-directing credit card expenses normally put on higher interest cards. According to Bankrate, Inc. penalty fees on credit union credit cards are also lower. 

• Personalized service

Since credit unions are often relatively small in comparison to banks. This is helpful when seeking to develop a banking relationship with credit union staff and employees. Personalized financial services through a credit union can also assist with speedier and more helpful service. For example, obtaining help with the loan application process, with opening accounts and choosing between different financial products is facilitated through personalized financial assistance.

An overview on new bank fees

Bank fees not constrained by banking regulation are on the rise according to reports across the U.S. Observers claim the new bank fees and fee increases are due to interest and fee restrictions imposed by the Credit Card Act of 2009. However, larger banks may also be trying to offset smaller profit margins and $50 billion in higher aggregate Federal Deposit Insurance Corporation (FDIC) fees arising out of the Financial Regulatory Reform law enacted in July, 2010.

Some of the new bank fees that are beginning to emerge are account transfer fees, inactivity charges and maintenance fees. These are bank fees that are new for some banks seeking to supplement revenue, but are not necessarily new types of fees. Additional fees pointed to by the NASDAQ stock exchange and Investopedia are minimum balance fees, overdraft protection fees, ATM charges, check fees and even miscellaneous fees.

Essentially, if it comprises a financial service and it's legal, there's little reason to think some financial institutions won't consider implementing new account cost structures. So which financial institutions are less likely to charge new bank fees and why? According to the Financial Reform law and the Baltimore Biz Journal, smaller community banks and credit unions are less targeted by the new financial reform law.  However,  a smaller financial institution such as a credit union with limited assets, is also more likely to issue smaller loans and provide more limited financial service options.

Ways to determine which banks are charging what fees, and if a financial institution is worth banking at include reading customer bank reviews such as the full reports at consumersearch, consulting the Federal Reserve Bank's website about Bank Accounts and Services, and mortgage loan shopping,  and by contacting financial institutions directly with questions. The Federal Deposit Insurance Corporation (FDIC) recommends keeping a close eye on banking correspondence and seeking alternative ways to receive the same services at lower cost such as withdrawing money with purchases rather than through an ATM. 

According to Qcitymetro, new and higher bank fees charged by Wachovia and Bank of America include paper statement fees with copies of canceled checks, printed account summaries, flat rate fees for some types of checking accounts, higher monthly account charges and fees for using ATMs from other banks. Still more fees to watch out for are paying credit cards off in full and line of credit fees. For example, HSBC bank charges its clients $10 for each day of overdraft protection used according to a September 25th report by Blake Ellis of CNN Money.

Sources: 

1. http://bit.ly/b3tOtN (FDIC)
2. http://bit.ly/aTYdIQ (U.S. Senate)
3. http://bit.ly/aV2TKG (NASDAQ)
4. http://bit.ly/bsmF7G (Baltimore Biz Journal)
5. http://bit.ly/cI6Uv2 (Qcitymetro)

Credit union credit cards: Why they're better than banks'

Credit Union credit cards are better than bank credit cards in the sense they have lower average interest rates and may be issued more responsibly. Since credit unions are non-profit organizations, the modus operandi is different than for a for profit bank. Moreover, a credit union is a collaborative and cooperative of members who's deposits, fees and interest payments to the credit union assist the credit union in serving the membership as a whole. This is reflected in credit union credit cards because they are generally more cost effective than bank credit cards. Bank credit cards do have some advantages in terms of accessibility, credit limits and product line however, credit union credit cards are on average more cost effective than bank credit cards as this article demonstrates.

Bank credit card(s)

According to indexcreditcards.com, the average credit card rate for the entire credit card market is 14.03%. This market includes credit unions which have a 2.74% lower average interest rate on credit cards than banks (hffo.cuna.org) Banks are also more likely to charge higher fees for penalties such as late payments and over limit fees. According to Judy Dahl, a writer for hffu.cuna.org, banks charge $15-$20 more for late payment fees than Credit Unions in addition to an average $13 higher over limit fee on checking accounts.

• Higher average interest rates
• More late payment fees
• Elevated over limit fees
• Credit card checks may charge transfer fee
• Bank profits from credit card interest 
• Fees do not necessarily lead to lower interest products
• Low credit scores more likely to lead to higher credit card APR
• Additional fees and/or surcharges more likely

Credit Union Credit Card(s)

Credit Union's are interested in serving their members financial interests as a priority rather than meeting the banks profit objectives as first order of business. This leads to overall benefits on credit cards across the board. Junk fees are less likely to be charged, additional or supplementary services related to payment or maintenance of credit cards is more likely to be free or lower cost and penalty fees are more lenient on average.

• Manage credit card payments through credit union
• Lower average interest rates
• More cost effective late payment fees and over limit fees
• Credit Union income serve member interests
• More likely to issue credit responsibly
• Fewer and/or lower supplementary service fees
• Free online credit card bill pay at some credit unions

Summary:

The benefits of credit union credit cards are clear as this article has demonstrated. While some banks may offer better credit card deals than some credit unions, on average, banks are less likely to provide more financial cost advantages to credit card holders based on average statistics. Obtaining a Credit Union credit card may be more difficult than a bank credit card, and credit limits may be lower on average, however other than this, the benefits tend to stack up in favor of credit union credit cards due to the lower costs. There is always some room for disagreement as to which is better as banks may have a wider range of products and services for a higher cost. Moreover, if cost is not an issue for a client, the lower costs provided by credit unions may not be considered an advantage. For budget minded folks however, credit union credit cards present a clear cost advantage.

Sources:

1. http://www.consumersavvytips.org/the_credit_union_vs_the_bank.html
2. http://www.indexcreditcards.com/creditcardmonitor/
3. http://hffo.cuna.org/13856/article/1894/html/