A credit union is a not-for-profit financial institution chartered by the state or federal government and owned by its members. Credit unions may be formed by any group with a common bond, such as teachers or farmers. It is governed by a board of volunteers who are elected by their fellow members, and can be formed by any group with a common bond. Because credit unions are nonprofit organizations, they don’t pay taxes on their profits the way banks do. This means they can provide low-cost financial services such as loans, checking and savings accounts, CDs, debit cards, and even credit cards. Most credit unions protect their accounts for up to $100,000 through the National Credit Union Share Insurance Fund but check with the individual credit union before you become a member.

Thanks to the Credit Union Membership Access Act, signed by President Clinton in 1998, more people are now eligible to join credit unions through associations, churches, schools, civic groups, and even members of communities. Members of these organizations are allowed to sign up immediate family members. This definition has been broad ened to include spouses, children, siblings, parents, grandparents, grandchildren, stepparents, stepchildren, and step-siblings, as well as “household members,”which includes people living in the same residence as a single economic unit. Over to 10,000 new groups have joined credit unions since 1998.

Credit unions are a great concept. At this writing, there are nearly 13,000 credit unions in the United States. While credit unions may offer higher rates for consumers on deposits (such as CDs and savings accounts) and lower rates on loan products (such as mortgages) than traditional banks, they may not compare with the rates that online banks now offer consumers.

Credit unions started through work groups where the facilities were generally located onsite. Unlike banks, credit unions are owned by the members who elect their own board of directors and have voting rights (because they are actually stockholders). If you can’t find a financial institution that will allow you to become a customer or a member due to your past financial difficulties, ask what you need to do to become financially stable in their eyes. Then work toward that goal and reapply. Talk to one of the officers of the bank or credit union when you want to initiate this conversation. Of course, ask whether they are FDIC- or NCUSIF-insured before you go further.

Share This

Credit cards could be considered a staple among the financial tools at our disposal. Some experts consider them a requirement in today’s world. Today, you can’t buy a plane ticket, reserve a hotel room, or rent a car without a credit card. I suggest you view credit cards as a tool that can help you. If you’re responsible and payoff your credit card bill every month, you can use that card to help you earn bonuses such as frequent-flier miles, which is a great benefit.

Credit cards are also known as the best friend of new business owners, who often don’t have the track record to get a traditional bank loan. Often, they can finance their new business by utilizing their credit cards as a lending vehicle, and spreading the payments out over time. While credit cards can be wonderful and offer us convenience, they can be a deadly part of the debt game.

Credit card lenders are really banks. The banks collect deposits from consumers and other entities, and then loan that money out. However, in the case of credit cards, they’re loaning that money out to credit card customers instead of traditional bank lending customers.

A credit card provides high-interest, unsecured loans that allow the cardholder to “buy now, pay later.” This is a very lucrative business for the banks that issue credit cards to consumers. They make up to 21 percent or more on the balance due if the balance is not paid off each billing period, and new purchases begin accruing interest right away.

This is known as a revolving account because the holder can simply roll the new balance to the next billing cycle and pay only the stated minimum amount shown on the bill. These cards mayor may not have an annual fee depending on the other “goodies” like frequent-flier points, money back at the end of the year, or no annual fee.

Credit card rules can also change frequently. What may look like some junk mail may actually be a brochure that tells you the rules of the game have changed. If you don’t pay attention to it, you may be in for Some surprises on your bill. My credit card company changed the envelope that the bills came in and it looked to me like more offers to get a credit card. I threw them away unopened until I got a phone call asking me why I suddenly stopped paying my bill. When we discovered my problem, I agreed to pay it immediately and they cancelled the accrued interest and late charges, due to my excellent payment record. Keeping the cardholders ignorant is an advantage to the credit card issuer but they do have to disclose any changes to your original agreement. If you miss them, you’re the one responsible.

Most of the major credit card companies work hard to educate consumers about credit card debt and how to make it work for you. Next time you’re in the bank or browsing online, look for information about the use of credit cards by the issuing companies represented by the bank.

Share This