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Bank Alternatives - What do Credit Unions Offer?

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Credit Unions were set up on a cooperative basis to offer members financial services, usually at rates better than those offered by the Banks and to people who might not always qualify to conditions stipulated by the larger commercial institutions. The movement became very popular In the US as an example of citizens’ self-help strategies during the Depression years of the 1930s. In those times Commercial lenders cut back on loans and lines of credit that caused a great deal of financial hardship to the ordinary citizens. Are we entering a similar time today? If you are about to file for Chapter 7 Bankruptcy, a Credit Union is not for you at this stage. However, if you have your sights set on a prosperous financial future it most certainly is. What then can a Credit Union offer me?

• Savings: Interest rates vary, but right now they are very low. An average CU will offer you 0.75% on a savings account. Once you join as a member, you are required to start saving on a regular basis. If you were to put the money in the Bank you would expect to have a return of 0.51% in interest. There you see a slight difference!

• Interest rate checking accounts: An interest rate checking account is also generally available from a Credit Union. For the convenience of writing checks the interest will drop to a rate of circa 0.53%. Banks vary in the rates they offer for this service, but expect to receive something in the region of 0.41% at this time. Once again you will see the CU offers a slightly advantageous rate of interest.

• Money market Accounts: Yes, CUs work in this area as well. Overall they offer the same services in the US as Banks do. On a Money market account a Bank will give you 2.37% in these times but the cooperative will pan out rather better at 2.89%. Sadly interest rates are not particularly attractive at the moment. It seems fiscal policy is more geared to lend you money than encourage savings, but then it wont lend you money either so you find yourself entering a catch 22 situation!

• Loans: When it comes to borrowing money the CUs serve their members a lot better than Banks. Go along, as a member of course, to your local Credit Union and you will be able to secure a 48-month new car loan at 5.44% interest. The Banks won’t be able to touch that and you will be lucky to find anything available at less than 6.8%. Often you will be offered credit company car loans at a great deal more than that. Definitely you will save considerably if you take your car loan from this source. Used car loans for a similar repayment frame will be an even better deal, but interest rates will be higher, but not much when your local group offers it.

• Credit Cards: In the US Credit Unions provide credit cards and the APR is usually way below that charged by the more usual service providers!

• Mortgages: A this time your Credit Union will offer you 6.1% interest rate on a 30 year fixed term product. Banks will lend at 6.12% but now the lending criteria has hardened and it could be difficult to get a mortgage at a low rate of interest at all.

• So you see Credit Unions act very similarly to banks and because they are not working for profit and save huge wage bills because a lot of the work is done for free by volunteers, they can offer financial products at better rates than the Banks. However, do not expect to walk into a Credit Union become a member and walk out with a 48 month car loan all on the same day. You need usually to start to save and establish a record with the CU before they will lend you any money for anything.

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