Tuesday, July 29, 2008

Why You Need a Credit Union Relationship

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 rules

  • Penfed eligibility rules

  • Navy Federal eligibility rules

  • Patelco eligibility rules

  • A list of the top 50 credit unions by total assets and members


awedio said...

top notch! very nice info.

which one of these CU will do a hard pull b4 you can join?

Credit Matters said...

Penfed definitely pulls your Equifax report when you join. The good news, though, is that Penfed will use that same credit report pull for other loan products that you apply for during the first 30 days (it could be slightly longer, but I've seen people recently complaining about new reports being pulled right after the 30-day mark).

It's been a few years since I opened my NASA account, so I don't recall if an inquiry occurs at membership formation.

If you are applying for a credit card at the outset, though, it won't matter. NASA is good about using the same pull to qualify you for the card.

This caveat, though, on many of the credit unions. There have been reports that some of the credit unions, Penfed and NASA included, have been doing pulls across the various CRAs (Experian, Equifax, and TU). I think it's a "your mileage may vary" situation.

Good luck, Awedio.

Thanks for reading.

Marilie1975 said...

NFCU pulled EQ each time I applied for an account - they don't use one pull for multiple products (wish they did!). Just an FYI. Great blog, as usual!

A Texan said...

Another great blog!

In your opinion/experience dealing with Credit Unions, do you think having many credit unions is a bad thing?

Is there a such thing as having "too many" credit unions?

Credit Matters said...

Marilie, thanks for the heads up on Navy Federal Credit Union. Good to know.

Thanks for reading.

Credit Matters said...

Texan, I know people who have 5-10 credit union relationships. While I think that's on the high side, those people may not agree with me.

I currently belong to two credit unions -- Penfed and NASA. If I qualified for Navy (I don't), I'd make it a third. But I would think, for me at least, that three is a good number.

Thanks for the question.

SpaghettiBender said...

Funny you would post this today.
I have been wondering about joining a credit union. There's one in my town. Your info just pushed me over the edge to go open an account.
I will be needing an auto loan within a year or two!!

Credit Matters said...

Spaghetti, credit unions are great for loan products. I wouldn't be surprised if you got a great auto loan rate.

Let me know how it goes.

Breathe said...

Soon enough you'll be able to make your deposits from home (scanning the check, sending it in later) and then there is no "branch" excuse.

CUs are also still well capitalized during this... rocky time.

Disclosure: I admit I'm biased, I work for the industry, but I belonged to credit unions for years before starting to work for them. IMHO, the local owned and operated model is great for real people looking for flexibility and service and who are tired of being a profit center for bank shareholders.

FYI, there's a website you can use to see what CUs you might qualify for. http://www.findacreditunion.com/

Credit Matters said...

Breathe, thanks for the post. And, yes, credit unions are doing well during this downturn.

I'm big on diversification. I don't think you can go wrong with a credit union.

Hey, thanks for that link.

Thanks for reading the article.

awedio said...

Which CR does NASA pull?

Will NASA use the same report for other loan products?

Credit Matters said...

Awedio, I only have one credit card through NASA. It's been quite a while since I applied.

It was an EQ pull and I only applied for that one card back then. As a result, I don't know if they would have used a single pull to qualify me for more of their products.

My suggestion is this: call and see if they use one report if you apply for a few products.

As for credit pulls (at the time of application), I have heard about NASA pulling more than one initially.

If you call NASA, be sure to chime back in. NASA is already open on the east coast. Give them a buzz.

Marat said...

I belong to PenFed and Alliant FCU.
Penfed 1. Great cashrewards CC
2. Great ( at that time) autolaon rate (4.25%)
Alliant 1. Grate rate on savings and HSA. 2. Great aoutoloan rate (3.74%).
Both Great CS (24/7). Very patient. I have opposite problem. I speak English with very thick slavic accent. CS reps of both CU's were so patient with me I just speechless.
An additional reason is don't keep all eggs in one basket.

awedio said...

just got off the phone with NASA, to join, they pull EQ.
If you then apply for loans, cc's etc they will pull another EQ. The second EQ pull is good for up to 30 days.

I just called & joined Penfed, they pulled EQ.
The EQ pull is good for 60 days.
The Penfed process was nice, smooth & easy. Took approx 10 mins.

Credit Matters said...

Marat, you seem very well organized. You clearly have a plan and you build around that plan.

That's great to hear about the CUs. Language barriers can be challenging. In college I tutored international students. I understand the difficulties. Glad to hear that your CUs were patient and helpful.

Credit Matters said...

Awedio, thanks for the updated information. I'll update my story with the new information. I'll give you credit for the new information.

Thanks again, pal.

awedio said...

It's all good, don't worry about giving me credit.
Just keep the info flowing via your blog.
I'm here to contribute whatever I can. The more peeps that can be helped, the better!!

Credit Matters said...

Awedio, I have already credited you. The story has been updated.

Check it out.

And thanks again.

awedio said...

Penfed vs NASA, which one gave you a higher credit limit on your credit card?

I'm trying to decide if I should join NASA.

My Penfed inq is the only one I have on EQ

awedio said...

Nice, thx for the credit.

Credit Matters said...

NASA gave me the higher initial limit. Today, Penfed is higher.

They've both been extremely generous with their limits.

Credit Matters said...

Credit where credit is due, Awedio.

Thanks again.

awedio said...

additional Penfed update:

The whole transaction, including joining the NMFA, was done on 1 phone call

My eligibility was via NMFA (National Military Family Assoc)

Penfed recommends using a debit card, otherwise the initial fees are billed as a cash advance if a credit card is used

Credit Matters said...

Given the difficulty that some people are having with the online application (some things are kind of ambiguous), it looks like calling it in could be pretty smart.

Sounds as though it was a painless process. I like how you can request your own credit limit. If they don't like your number, they counter with their own.

Pretty nice system.

Elusive D. said...

Thanks for the Credit Union information--recent contact with Capital One has made me realize how much I want to diversify my credit portfolio! I just joined an organization that allows me to open a NASA banking account. Do I need to put a lot of money in an account there to apply for a card? How long should I wait before applying? Or should I just rely on them to send along a credit card app?

The information on this site is so useful to me--everyone should know this stuff!
Thanks again!

Credit Matters said...

Elusive D, you can fund your share account at NASA with as little as $25. Once you've done that, you're good to go.

Once you're a member of NASA, you can apply for a credit card right away. Don't wait for them to send you an application; you could be waiting a very long time.

If you're interested in a card, go ahead and apply whenever you're ready. And FYI: NASA tends to be sensitive to a lot of new accounts, lots of inquiries, and recent bankruptcies. Also expect NASA to request two recent paystubs before it issues a card.

By the way, Elusive D, any reason why you wouldn't go with Pentagon Federal instead? They've got a great cash rewards card. You get 5% back on gasoline, 2% on groceries, and 1.25% on everything else. Hard to beat this card.

awedio said...

CM, at Penfed, what "mix" of accounts do you have? checking, savings, money mkt., cd's etc?

Is there any significance to what makes up the "mix"?

Credit Matters said...

Awedio, I have a savings account, line of credit, and a credit card. Many of my friends only have a savings account and a credit card -- with nothing more.

Josh said...

Do all credit unions require recent pay stubs? Will they accept bank statements instead?

Credit Matters said...

Josh, here's my rule of thumb: you should expect a credit union to ask for a pay stub. Penfed asked me for mine. Nasa did not. My score was about 740 when I applied at Penfed. It was 773 when I applied at Nasa.

Will they accept bank statements in lieu of pay stubs? I cannot answer that question. I would suggest that you call the credit union and see what its policy is. They'll likely ask you why you can't provide a pay stub. You'll need to be prepared to answer that question.

My advice: call.

Josh said...

Anything beats a full IRS tax return disclosure, but I sure will speak to them before I apply.

BTW, are credit unions less apt to do a CLD(Credit Line Decrease) or AA(Adverse Action)?

Credit Matters said...

I have very much enjoyed my CU relationships. Not a whiff of AA from either of them (penfed or NASA). Just a total joy doing biz with both. I've never suffered a CLD.

Anonymous said...

Thanks for the info! I just opened an acct with PenFed and my local credit union (State Employees).

GlobCredit.com said...

Anon, that's outstanding. Enjoy your credit-union relationships. They're really easy to work with. During this difficult credit environment credit unions are the way to go.

Thanks for the note, Anon.

Be well.

Anonymous said...

While researching credit card, savings, and CD rates I researched a number of credit unions.

Here's a list of quality CUs anyone can join (excluding the already mentioned NASA and PenFed):

Alliant -- great savings rate

Digital FCU
Addison Avenue
Delta Community

All of these have low interest cards and most have good CD rates.

Because many of these had the highest savings, CD, and best credit card rates and rewards, I have joined all of them (including PFCU and NASA). I want to be able to take advantage of special offers and opportunities as they come up and as I am ready.

For instance, after opening a 4.25% CD with ING, I learned Delta had the same term for 4.5% and with only a 30 day penalty for early withdrawal.

PenFed has the best cash back credit card but DCU, Redstone, and Vystar have the lowest interest rates on their cards.

At the moment I am actually only using Alliant for their savings account (3.75%) and credit card.

I applied to Vystar but they've asked for my last two years tax returns! For a credit card!

Do you think it will make a difference if I open a CD with them?

GlobCredit.com said...

Anon, not sure that it will make a difference. They're gonna want those income tax returns -- whether you get a CD or not.

And thanks for the list of CUs that you enjoy. My readers will appreciate the post.

Take care.

brendastar* said...

Merry Christmas
Does anyone have information regarding getting back on track after filing bankruptcy? My discharge will be effective 2/23/09.

GlobCredit.com said...

Brenda, I do not have any experience with BK, but I know that some of my readers do.

I highlighted one such reader in a story. You can read his story here:

One Man's Struggle to Overcome Bankruptcy -- and Reach FICO 800


Crlf said...

CM: Would you put USAA on this list? Even though they're technically not a CU?

GlobCredit.com said...

Crlf, I am a purist. USAA is not a CU, so I would not include them in this discussion.

That said, I know what you're getting at. Should USAA be part of a person's diversification strategy? Maybe. Unless you're military, I really can't say much about the cards. There are no benefits for the non-military members. The interest rates are higher. And USAA has been reining in limits recently.

Crlf, have you read the story I did on my own credit-card portfolio? In the story, I lay out why I got the USAA card. It served its purposes, but it's no longer a card I use on a regular basis.


Crlf said...

I missed that part about you and USAA. I didn't notice until a month two or ago that USAA even issued AMEX's. I got grandfathered in, literally, mine was in the Air Force. I joined like 10 years ago but I think they're still as liberal about allowing family members in. I get access to all their products, though they stopped issuing new homeowners policies in my area due to hurricanes.

When I first got their CC it was Visa then they switched to MC. I think they might be the oldest still active card on my cr. Over the years like clockwork they upgraded me into a higher tier with a lower apr and higher cl, reward points, warranty, etc. They're the 13k cl I mentioned in one of my other posts on here. My APR is currently 0+prime or 4%. Though I just got a letter from USAA the other day saying that starting next year they are putting a limit as to how low the apr can go (6%). Sucks but it's still pretty good. And the letter has to be one of the more warmly written things I've received from a bank, even with the bad news. What are some other 0+ cards? I know your Nordstrom's used to...

GlobCredit.com said...

Crlf, I don't know of any other 0%+ cards. Sounds like USAA has implemented a nice rate floor on everyone. That sucks.

Given that you grandfathered in, I would be quite content with my USAA affiliation. It's the non-military folk who don't get much in the way of benefits there. But that's understandable. This is a bank that is geared toward military, which I think is great.

And, yep, Nordstrom used to be 0% + prime (until recently).

Christian C. said...

You mention that many credit union branches are inconveniently located. However, many credit unions are part of the Co-Op system. That means you can make withdrawals at other credit unions' ATMs without any fees, and at many ATMs, make deposits.

GlobCredit.com said...

Thanks, thanks for pointing that out. I am a BIG fan of credit unions. That's just another reason why I like them.

knight said...

let's not forget that if someone makes an accounting mistake and get charges Non-sufficient funds fee, the CU are mostly merciful. They will only take 19 to 20 dollars per NSF transaction, while banks will hit you with a $30-45 fee.

GlobCredit.com said...

Knight, another good point. If you do manage to slip up the CUs are more forgiving.

knight said...

Re. Christian's comment, with NFCU, every 7/11 is a free ATM with deposit capabilities in some locations. This is even better than BOA. lol

Anonymous said...

Is balance transfers considered a cash advance with Pentagon Federal Credit Union credit cards?

GlobCredit.com said...


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