If you aren’t doing business with a credit union, you’re missing out.Everybody should be doing business with a credit union. They’re easy to join, they’re easy to deal with, and they’re needed — for diversity purposes — in today’s era of big banks. Consolidation in the banking industry has left consumers with fewer and fewer options. I’m constantly surprised when friends and acquaintances tell me that they’ve only got one banking relationship and it’s with one of the huge bank conglomerates (such as Wells Fargo, Bank of America, Chase, Citibank, etc.). I’m not suggesting that you dump your banking relationship. Instead, I am suggesting that you open a credit union account in addition to your mainstream bank account. Credit unions often have awesome deals on loan products. Because credit unions primarily exist to serve their members (and not to turn huge profits), they’re able to offer lower interest rates on loan products, lower fees, and higher interest paid on deposits. Take Pentagon Federal Credit Union, for instance. It was recently offering 4.25% on auto loans (which included both used and new autos). Though the rate was recently upped to 4.5%, the deal is still solid. Penfed, which is what many people call Pentagon Federal, also has some great credit cards. My favorite, of which I recently opined, is the Pentagon Cash Rewards card. The card offers 5% back on gasoline purchases (at the pump), 2% on supermarket purchases, and 1.25% on everything else. Getting 5% back on gas purchases makes this card a no-brainer. For more information, read about the card here.To be sure, credit unions aren’t always conveniently located. Penfed, for example, does not have a branch where I live, which means that I can’t drop by to visit my money. But that’s OK. I use my Penfed relationship for credit cards and other loan products. It’s not my main source for deposit accounts. Same goes with my NASA credit union account. I don’t have much in the way of deposits with the credit union, but I do have a credit card. Both credit unions offer credit limits that go as high as $50,000. That’s the kind of limit I am looking for. It’s the kind of card that can grow with you over time. (Do note that most credit unions will request two recent pay stubs if you apply for a credit card.) According to one of my readers, Awedio, NASA, as of August 1, 2008, was pulling Equifax when you joined the credit union. What’s more, if you applied for a credit card or loan shortly thereafter, NASA pulls another Equifax report. That second credit inquiry is good for up to 30 days (meaning you could apply for several products during that 30-day period without incurring another hard inquiry). As for Penfed, it pulls Equifax when you join the credit union. Penfed will use that same Equifax pull for up to 60 days. Thus, unlike NASA, Penfed will only pull one Equifax report — and you’ll be able to use that pull for multiple products during the first 60 days. Thanks, Awedio.Credit unions also offer excellent customer service. Most don’t offshore their calls — even after hours. During the day, you’ll deal directly with the credit union staff. After hours, you’ll be dealing with a company that has been outsourced to handle the credit union’s customer base. Best of all, outsourcing is done with U.S.-based representatives. (If your credit union is off-shoring its customer service, please leave a comment at the end of this blog entry. I’d like to know which credit unions are moving their customer-service operations offshore. Thanks.)What’s more, your share deposits are just as safe as they’d be if they were sitting in an FDIC bank. Credit unions are insured by the National Credit Union Share Insurance Fund (NCUSIF), which is part of the National Credit Union Administration (NCUA). The insurance coverages are in line with the FDIC limits. An individual with several non-retirement accounts will be insured up to $250,000 total. (With the government bailout, the limit is now $250,000 until December 31, 2009. See NCUA press release here.) In other words, if you have (in your name alone) a regular share account, a certificate of deposit, and a share draft account, they’ll be calculated in the aggregate — meaning that you shouldn’t allow all three of those financial instruments to be worth more than $250,000 combined. (With the government bailout, the limit is now $250,000 until December 31, 2009. See NCUA press release here.) If they are, you’ll need to take the excess and move it elsewhere (to another credit union or bank, for example). That same individual will also — separately — be able to have an IRA that’s insured up to $250,000. For more information, here is a link to NCUA’s Web site.Finally, doing business with a credit union also provides diversification. Just as having several credit cards — with different lenders — is important, having a relationship with several banks and credit unions is likewise important. In today’s ever-shrinking banking world, it just makes a lot of sense to do business with credit unions as well. My friend Trevor, a guy who is a real genius when it comes to credit strategies, also makes this point: when a bank sees a credit union on your credit report, it knows that you have options. Diversity, Trevor says, is power. Amen, Trevor. Having options is imperative. That’s why I always recommend that people have more than one credit card from one creditor. You never know when a creditor will get an itchy trigger finger. Now that you know about the importance of doing business with credit unions, it’s time for you to start doing some homework. Indeed, you don’t want to join just any credit union willy-nilly. Always do your homework. I’d start with the big ones first (but don’t ignore your local credit union, either). I’d look into Pentagon Federal (doesn’t pull ChexSystems to qualify you for membership), Patelco (does use ChexSystems for checking accounts; not for savings), and the Navy Federal Credit Union (does not use ChexSystems, but there are other eligibility requirements that must be met; bankruptcy friendly). These are all solid institutions that treat their members well. By the way, I also like NASA (it does use ChexSystems). Even though it’s not one of the “big ones,” it’s a credit union that I would look into. They’ve always treated me extremely well and customer service is very good. NASA eligibility rulesPenfed eligibility rulesNavy Federal eligibility rulesPatelco eligibility rulesA list of the top 50 credit unions by total assets and members
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