If you're not already a credit union member, you may be wondering what the difference is between your local credit union and your local bank - you may be surprised to find out that there are indeed some very substantial differences - including the way they operate and who they work for.
Banks are the most popular financial institutions. Most are run by a group of investors who have a large amount of capital, which goes into the funding for the bank. Some are nationwide – such as Chase Bank or Wells Fargo – while others are smaller, local institutions. Either way, a bank's primary purpose is to make money for the investors and for the stock holders.
Banks are federally insured by the Federal Deposit Insurance Corporation. A paid Board of Directors makes all of the decisions for the bank, which are usually profit-driven and hold little benefit for the customers of the bank. Anyone, in any city or state, can open an account with a bank, and customers hold no voting privileges or decision-making power within the institution.
Credit unions, on the other hand, are designed to serve a particular group or neighborhood. People who use credit unions for their financial services are members of the credit union, rather than customers. Since credit unions are not-for-profit organizations, the profits incurred by the credit union directly benefit the members after covering overhead costs.
Credit unions are insured by the National Credit Union Administration, and are democratically controlled by the members. This means that members have more say in how the credit union is run, and hold decision-making power. Members elect a Board of Directors – rather than hiring one – who are chosen to fully represent the members in making decisions and upholding policies.
Many people choose credit unions over banks because credit unions allow for lower interest rates and low-cost services. They like the fact that they are treated as a benefit to the institution, rather than "just another account number". The more members who deposit money into a credit union, the higher the benefits to the existing members. Credit unions are also tax-exempt.
In the past, credit unions have offered a limited range of resources, which included only low-interest loans and savings accounts. They have recently begun to expand their services to include checking accounts, IRA's and credit cards. Some have also begun to diversify in the types of loans that they offer. Many credit unions worldwide offer student loans, small business loans and mortgages. Banks, however, do offer a wider range of services, and are often more accessible to customers. For example, if you have an account with a branch of Wells Fargo in California, you can access that same account at branches and ATM's in New York. This makes travel easier for many people.
Many companies – from small businesses to large corporations – have "adopted" credit unions as their source for maintaining IRA's and pensions for employees. This is universally beneficial because it makes the company's job much simpler, rather than having to deal with multiple institutions, and the employees are not only members of the credit union, but also owners, as all members of credit unions own a small share of the institution.
If you have a bank account a traditional bank and an IRA account with a credit union, you might be enjoying the best of both worlds. You can obtain the benefits of the credit union while still retaining access to the diversity of your bank.
Since credit union members usually have higher interest rates on savings accounts, you might also want to open a savings account with your credit union, while leaving your checking account with a traditional bank. Most credit unions offer ATM cards along with savings account for member convenience.
A current trend among banks, which is sending more people to credit unions, lies in the charging of monthly fees. For example, if you have a checking account with Bank of America, you will be charged a monthly maintenance fee unless you have direct deposit from your employer or maintain a specified balance.
With a credit union, this isn't an issue. Since credit unions aren't in the business of making money as not-for-profit organizations, they don't charge the high fees and finance charges of traditional banks. To find information about credit unions in your area, go to your local phone directory. Locate credit unions that are close to your home, and visit to learn more. Financial decisions should be based upon informed research of all options, and you might find that a credit union could be saving you money.
Likewise, if you know that you will be needing a monetary loan in the next several months, you might want to look into opening an account with a credit union. It will be easier to secure a loan if you are already a member, and the interest payments will be significantly lower than with a traditional banking center.
In order to achieve and maintain financial success, it's essential to understand the financial habits of successful people. We did some research on this topic, and here are some of the fundamental rules that have made most millionaires their hard-earned money and how you can develop these habits yourself.
If you are a homeowner who is having trouble making your mortgage payments, you most likely want to do whatever you can to stay in your home and to avoid a foreclosure. The first thing you should keep in mind is to stay in close contact with your lender. If you are going to miss a mortgage payment, inform your lender, keep good records of all your correspondence and use registered mail to send documents and letters so you can verify that they were received. Most lenders will work with you, as foreclosing on homes carries heavy costs for them. The following are options to keep you in your home, while you get back on your feet.
One way to work things out with your lender, if you are delinquent on your payments, is to negotiate a reinstatement of your mortgage loan agreement. A reinstatement agreement requires you to stay current on all of your future payments and to commit to agreed on payment terms for all your missed mortgage payments. Missed payments may be required in a lump sum or it's possible you can pay the arrears in supplementary monthly payments to your regular mortgage payment over a period of 12 to 24 months. Reinstatement is really only an option if you were having serious financial problems but are over them, as it requires substantial monthly payments moving forward. If you can receive help from a family member or sell a valuable asset, reinstatement is a worthwhile option to pursue.
It may be impossible for you to stop making your payments, temporarily. Forbearance is an agreement between you and your lender, where your lender agrees to not pursue foreclosure and to accept no mortgage payments or a reduced mortgage payment for a defined period. If you have a temporary disability or can show that you expect money from an insurance pay-out or tax refund, you may qualify for forbearance. You need to have a positive payment history to be eligible. Forbearance is only granted if your lender is confident that you will be able to resume making your normal payments plus pay back the any arrears accumulated while in forbearance. In most cases the length of the forbearance plan will not exceed 18 months. Most forbearance plans stipulate that foreclosure will proceed, if the borrower defaults on the agreement.
An important option for you to consider is a loan modification. A loan modification is a permanent change to one or more terms of your loan. Your lender can modify your loan by reducing your interest rate and the size of your monthly payment, by extending the repayment term of your loan, or by agreeing to reduce the principal balance of your loan. A principal balance reduction is negotiated when the value of the property has dropped. Balance reductions became relatively common starting in 2008, in reaction to the dramatic decline in home prices in many areas. As a borrower in distress, you must meet certain guidelines in order to qualify for a loan modification. The lender will examine the size of your loan compared to the fair market value of the property, your debt-to-income ratio, and your credit history.
A last resort option that allows you to remain in your home is for you to file for Chapter 13 bankruptcy. Once you are under the supervision of the bankruptcy court, your lender cannot proceed with a foreclosure. The goal of filing bankruptcy, in these circumstances, is to allow you to retain possession of your residence while you participate in a structured repayment of your debts. Consult with an attorney who has experience in bankruptcy to discuss whether bankruptcy will allow you to keep your home.
It makes sense to take every step possible to stay to stay in your home. If you are having problems making your mortgage payments, it is crucial for you to know what steps you can take to avoid losing your home to foreclosure.
What would you do if a friend or relative asked you to cosign a loan? Before you answer, make sure you understand what cosigning involves. Under federal law, creditors are required to give you a notice that explains your obligations.
You are being asked to guarantee this debt. Think carefully before you do. If the borrower does not pay the debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility.
You may have to pay up to the full amount of the debt if the borrower does not pay. You may also have to pay late fees or collection costs, which increase this amount.
The creditor can collect this debt from you without first trying to collect from the borrower.* The creditor can use the same collection methods against you that can be used against the borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, that fact may become a part of your credit record.
This notice is not the contract that makes you liable for the debt.
* Depending on your state, this may not apply. If state law forbids a creditor from collecting from a cosigner without first trying to collect from the primary debtor, this sentence may be crossed out or omitted altogether.
Studies of certain types of lenders show that for cosigned loans that go into default, as many as three out of four cosigners are asked to repay the loan. When you're asked to cosign, you're being asked to take a risk that a professional lender won't take. If the borrower met the criteria, the lender wouldn't require a cosigner.
In most states, if you cosign and your friend or relative misses a payment, the lender can immediately collect from you without first pursuing the borrower. In addition, the amount you owe may be increased — by late charges or by attorneys' fees — if the lender decides to sue to collect. If the lender wins the case, your wages and property may be taken.
Despite the risks, there may be times when you want to cosign. Your child may need a first loan, or a close friend may need help. Before you cosign, consider this information:
Credit Card and Spending Information For Students and others new to credit.
Despite all the recent hype regarding students and credit card offers, if you haven't begun to use credit, it may actually be a good time to check out current credit cards available to you and begin establishing a credit history.
However, proceed with caution. It's important to keep in mind that regardless of how important a credit score is in today's financial world, having thousands of dollars of debt to repay after graduation is a bad idea, especially when you're also paying off student loans and trying to make ends meet on an entry-level salary.
Today's students are presented with a wide array of credit card choices—cards with low annual percentage rates, cards with no annual fees, rebate cards, and so on. So how do you choose one? Before selecting a card, be sure you know which credit terms and conditions will apply to the account. The Truth in Lending Act is a federal law that promotes the informed use of consumer credit by requiring disclosures about its terms and cost, using specific terminology. In short, the Truth in Lending Act allows the student to "shop around."
If you are at least 18 years old, or 21 if a permanent resident of Puerto Rico, and have a regular source of income or savings, you're on your way to qualifying for a credit card. But you'll still have to demonstrate that you are a good credit risk. The proof is in your credit history, which lists the amount of credit you have received and if you've paid it back on time.
If you are a full-time student, make sure to include that information on your credit application. Creditors often assign full-time students lower initial credit lines to start their credit files. As you advance through college and graduate school, you can always request increases to your credit line.
So how do you establish your credit history? Even if you've never applied for credit before, there are ways to start building a good credit history:
Some credit cards may have an "annual fee" they apply to your card. Please see the terms and services agreement on your card carrier for more information.
APR stands for Annual Percentage Rate. APR is the amount of interest you are going to pay on your card annually. Your first credit card will always tend to be a high APR rate. The same goes with bad credit as well. The better the credit score, the lower your APR typically is.
A balance transfer is when you take funds from one credit card and transfer it to another. Sometimes banks will offer promotional rates to get you to switch.
This is the limit that you are allowed to charge. If you charge more than this amount, penalty fees usually are applied or your purchase may be declined.
A Grace Period is the time the customer has to pay off their balance. Grace period can range anywhere from 20 to 30 days. If a payment isn't made after your grace period is up, late fees and a higher interest rate can be applied.
An Interest Rate is the rate the borrower must pay to borrow the credit. This is paid on the ongoing balance.
The minimum payment is the amount you must pay each month to avoid late fees or hurting your credit score. This number is a percentage of your outstanding balance and is relatively low to your overall balance most of the time. Once again, this depends on the card issuer.
These are the fees a credit company usually charges you. These can vary from going over your credit limit to paying your bill past its due date. Penalty Fees will vary from card to card.
Secured Credit Cards
A secured credit card is a card that usually requires a deposit to be kept as collateral. Typically the deposit is the credit limit. Secured Credit Cards are ideal for people with bad or no credit.
Unsecured Credit Cards
An unsecured credit card does not require collateral for approval and applications are approved based on your credit history, and earnings.
When you have little or no credit history, applying for loans and credit can be difficult, if not impossible. Lenders like to see a record of payment history and a current credit score before they extend credit or loans. This information also helps them determine what interest rate to offer.
If you do not have a credit history, here are some ways to build it one:
If you are looking to establish credit for the first time, lenders can't look to your credit score to decide whether or not to lend you money. In these situations they have to examine other factors that can help them decide if you are a good credit risk or not. Here are basic guidelines to follow to establish or re-establish your credit:
Establishing a good credit history takes time. There are no shortcuts or tricks that can take you from no credit at all to a high score in a matter of months. Remember - your credit score is based on a number of factors such as payment history, length of time you've had credit, how much you owe and much more. Here are a few "don'ts" to keep in mind:
Although this information may appear on your credit report, it is not taken into consideration for your credit score:
The number of various types of accounts (credit cards, retail accounts, installment loans, mortgages, consumer finance accounts, etc.)
Apply for and open accounts only as needed. (Opening new accounts is not a short-term solution.) It is a good rule of thumb to have 3 open and active revolving accounts along with 1 to 2 installment accounts and one mortgage.
A credit inquiry will appear on your credit report when your credit report is pulled for purposes of extending credit or by your current lender for other purposes.
These inquiries affect your credit score. When you apply for a mortgage, auto loan, credit card or other type of account, you authorize the lender to obtain a copy of your credit report. These types of credit inquiries, when prompted by your own actions, appear on your credit report and will impact your credit score. Avoid an excessive amount of inquiries. Excessive depends on the depth of the credit profile. More than 5 inquiries may be excessive for people with a lack of credit. If you are shopping for a mortgage or automobile and you know you will incur multiple inquiries, make sure you have your credit pulled within in a short, focused amount of time. Depending on which scoring system you are dealing with, you may have a 15 day, 30 day or 45 day window to shop for and apply for credit for the purpose of obtaining a mortgage of automobile financing, thus incurring inquiries without the inquiries counting against you separately. The scoring system recognizes that you are shopping and will count the multiple inquiries as a singular inquiry, if it falls within the allotted timeframe.
These types of inquiries do not affect your credit score. When you choose to pull your own credit report through an online resource, it is considered a consumer-based inquiry and will not affect your credit score. Also, many of your creditors or collection agencies have the ability to pull your credit report to review your account activity. Credit reports pulled by a prospective employer when applying for employment will not affect your score.
In many cases a company will pull your credit report in order to send you pre-approved credit offers or other promotional offerings. These inquiries do not affect your credit score. To prohibit the ability of creditors pulling your credit report for promotional purposes you must OPT Out by calling 888-867-8688.
In today's increasingly connected world, we may find ourselves wanting to use a computer away from our home. As any traveler can attest, computer kiosks are in every airport and in many coffee shops. Additionally, wireless networks are everywhere, many of them free or available for a small fee. This easy availability of computers and networks makes it very easy to make purchases online, check your email, chat with friends, or even balance your check book from just about anywhere.
That being said, lurking in the back of your mind as you reach for the mouse on one of these machines is (or should be) a fundamental question. "Can someone steal my information if I use this computer?"
The answer is "YES!"
Since you cannot know what software or hardware has been installed on these computers, it is impossible to be 100% sure that someone has not installed something that will capture your username and password or other account information. Any computer that you do not own or control should be used with caution.
Avoid public places and networks.
Don't do online transactions when you're using public wireless networks. It's safer to buy online at home. When you conduct business in public places using wireless connections such as motels, airports, coffee shops, and bookstores, you take a chance of someone seeing your laptop screen, stealing personal information. What's more, an intruder could grab the sensitive information you send over the wireless network.
Don't use public computers.
Because public computers may have programs that log keystrokes (keyloggers), as well as other spywares that snatch sensitive information, wait to make your Internet transactions until you get home.
Use credit cards instead of debit.
Debit transactions are riskier than credit transactions because a criminal can immediately drain your bank account. The money is spent quickly, so the theft is harder to fight. On the other hand, a credit card theft is not as disastrous, as your credit card company can help you resolve the matter. Use the same credit card if you have more than one. If you still have reservations about giving out your credit card number online, then use third-party escrow services such as PayPal.
Don't share SSN and/or birth date information.
Usually legitimate Web sites won't ask you to give out personal information such as your Social Security number (SSN) and/or birth date. By giving out both your birth date and SSN, criminals have enough data to apply for new credit cards in your name.
Keep accurate records.
Always keep accurate, detailed records of any online transactions. This way you'll have evidence of your purchase if problems occur.
Use updated anti-virus programs.
Be sure your computer is secured with updated anti-virus, anti-spyware, and firewall software.
Make sure you shop only at secure Web sites that use encryption. If the Web site uses encryption technology to transfer your information on your computer (such as credit card and bank account information) to an online merchant's computer, your information is scrambled so computer hackers can't steal it. Fortunately, the only people able to unscramble the code are those with legitimate access privileges.
Look for the "s" following "http" in a web address, indicating it's safe. However, realize you often you don't see the "https" until you move onto the site's order page.
Closed padlock display
The closed padlock display is at the bottom of your screen (on the browser's status bar). If that lock is open, you should stay away from that site, as it may not be a secure site.
An unbroken key also designates a secure site.
Strange web address
If a web address has a string of numbers at the beginning of the URL, be suspicious because this isn't an address you'd typically see for a reputable company.