I’ve always been interested in obtaining the best deals [financially] possible – getting the lowest rates [and fees] associated with mortgages, car loans, credit cards, and other financial products. An article in this month’s (March 2007) Consumer Reports Magazine suggests that the source of these deals are commonly credit unions. Credit Union membership is no longer the exclusive group that it used to be. Almost anyone (everyone?) is eligible to belong to a credit union (8,700 credit unions in the U.S.) based upon some criteria (being a student, geography, employer, religion, family member of someone that meets criteria, etc.)…
Credit Unions are often able to offer superior rates [not always, but often the case] because their shareholders are the customers (referred to as “members”) of the credit union, commonly referred to as a “cooperative.” That means that instead of profits going “out” to stockholders; savings are distributed “within” to its membership through higher interest/dividend payouts and lower loan rates on financial products. This “not for profit” ownership structure means that credit unions also pay fewer taxes, giving them more opportunities to return value to their members. Datatrac is a market research firm that surveys nearly 20,000 financial institutions weekly to gather rate information. I mention this to give you an idea of “average” national rate differences between banks and credit unions. You can view the site to see more rate comparisons as well as up to date information. In addition to differences in rates, fees also often vary between banks and credit unions, so that should also obviously be part of the ‘shopping list.’
National Rate Averages as of 2/20/2007.
Money Market Accounts (CU = 1.93%) (Banks = 1.18%)
1 Year CD (CU = 4.73%) (Banks = 4.16%)
Regular Credit Card (CU = 12.25%) (Banks = 14.98%)
48 Month Used Car (CU = 6.48%) (Banks = 8.12%)
Let me share a local [local for me] example. Tigers Credit Union (http://tigerscu.org) is a small entity that serves students, alumni, and family members of the University of Missouri-Columbia, Columbia College, and Stephens College. The credit union has recently begun offering a student credit card with interest rates as low as 9.9% and offers a 0% rate for 6 months to individuals that meet with a financial counselor at the Office for Financial Success or complete one of our personal finance courses (such as Financial Survival and Financial Success) to encourage individuals to understand the costs/benefits of credit, potential pitfalls, etc. It’s also refreshing to see credit card terms that are advertised in a readable font size! They also offer a money market account that yields 5.35%, above average CD yields, competitive auto loans, free access to thousands of ATMs (not unique to them), and are working on an account that would allow a member to start an IRA for as little as $25.
At the University of Michigan, their Campus Information Centers have created a listing of local financial institutions that shares information about free accounts, fee structures, ATM access, and other information to help their students make more informed choices. We're planning to create something similar in the coming months that we can share with the MU community.
Click to locate credit unions near you.