Sunday, September 21, 2008


Switch your money to a credit union

by Larry Geller

So you’ve been a loyal bank depositor all these years, despite mounting fees and disappearing interest. Maybe now’s the time to re-think your loyalty.

It seems your bank doesn’t care about you, only about their profit (no surprise, of course, but I mention it in case you’ve been fooled by the commercials. The ones with the friendly banker faces who claim to love you).

They don’t love you. They love only themselves. And your money, of course.

WASHINGTON -- With as few as 72 hours before Congress votes on a federal financial-markets rescue, the financial industry has launched a ferocious effort to shape key provisions, in a fight that could yet stall the bill.

Lobbyists and financial-services executives are working deep connections within the administration to ensure as many institutions as possible benefit from a $700 billion federal mechanism to buy distressed assets, then sell them off in better times. In a particularly controversial move, they also oppose proposals by Democrats in Congress to provide mortgage reductions for homeowners facing bankruptcy. . . . [Wall Street Journal, Banks Rush to Shape Rescue Plan, 9/22/2008]

Did you get that last part??? More in the article

Here’s a plan. Open an account at a credit union. Many are open to anyone. From the Wikipedia:

A credit union is a cooperative financial institution that is owned and controlled by its members, and operated for the purpose of promoting thrift, providing credit at reasonable rates, and providing other financial services to its members.[1] Many credit unions exist to further community development or sustainable international development on a local level.


Credit unions differ from banks and other financial institutions in that the members who have accounts in the credit union are the owners of the credit union and they elect their board of directors in a democratic one person-one vote system regardless of the amount of money invested in the credit union. A credit union's policies governing interest rates and other matters are set by a volunteer Board of Directors elected by and from the membership itself. Credit unions offer many of the same financial services as banks, often using a different terminology; common services include: share accounts (savings accounts), share draft (checking) accounts, credit cards, share term certificates (certificates of deposit), and online banking. Normally, only a member of a credit union may deposit money with the credit union, or borrow money from it. As such, credit unions have historically marketed themselves as providing superior member service and being committed to helping members improve their financial health.

But isn’t there a disadvantage? Yes, a few, but there are also workarounds.

For example, credit unions often have a very small network of ATMs. Workaround? If there is no credit union ATM near you, keep your bank account, but only let the leeches keep enough of your money that you would take out of the ATM in a month or two. When the well is about to run dry, write a check from your credit union to yourself and deposit it in the ATM at the same time you’re visiting it for a withdrawal.

Online banking? No problem. I can access my account from my computer just the same as I do my bank account. I get statements in the mail, same as my bank sends me.

Now, how do credit unions do with home mortgages? Very well. Also from the Wikipedia article:

2006 Home Mortgage Disclosure Act data shows that U.S. credit unions approved 69% of low- and moderate-income borrowers' mortgage applications that they received, versus a 47% low/mod-income borrower approval rate for other U.S. mortgage lenders, and also that U.S. credit unions approved 62% of minority members' mortgage applications, versus a 51% minority approval rate for other U.S. mortgage lenders. The 2006 Home Mortgage Disclosure Act data also shows that 25.2% of all U.S. credit union mortgage originations were mortgages for low- or moderate-income borrowers, versus a 20.6% low- or moderate-income borrower mortgage origination percentage for other U.S. mortgage lenders. The National Credit Union Administration, however, has long discouraged U.S. credit unions from giving members loans that they may not be able to afford to repay and has forbidden other types of predatory lending and abusive credit practices. Federal credit unions are also forbidden from charging prepayment penalties on loans.

As we see from the Wall Street Journal article, banks have no love for us. Let’s start a revolution and show them how much we appreciate their attitude.


Are credit unions FDIC insured? What about significant assets that exist in CD's, broken up into multiple institutions to stay under the max FDIC protection per account?

I don't recall seeing any of that when I looked into credit unions. That's why I went with a traditional bank, but one whose investments weren't significantly in high risk mortgages.

Credit unions are insured, but not by FDIC.

From a brochure, posted to the web: "Savings are federally insured to $100,000 by the National Credit Union Administration (NCUA), a U.S. Government Agency. Above that, they are privately insured for $250,000 by Excess Share Insurance Corporation, Inc. (ESI) to a total of $350,000. IRA's are insured through NCUA up to $250,000. Above that, they are privately insured for $250,000 by ESI for a total of $500,000."

Of course, best to check this before opening an account.

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