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Debt Consolidation Facts

1. If you spend more than 50% of your credit limit every month, this indicates to the Credit Bureau that you do NOT have enough cash on hand to meet your monthly expenses. This will identify you as a high credit risk and will actually reduce your credit score by 60 - 70 points overnight (Fair Isaac).

2. If you miss 1 or 2 payments on your credit card debt, the issuing company will skyrocket your interest rate to a whopping 27% - 30%!

3. Out of a random sample of 3 million American consumers (included in Experian's National Score Index), 51% of them have at least 2 credit cards and 14% of them have 10 or more credit cards.

Credit Unions versus Banks

A credit union is a non-profit, member-owned cooperative financial institution.  Savings from members’ accounts provide a pool of financing.  Other members are allowed low-interest loans from this pool of financing.

There are several differences between a credit union and a bank.  Check out a few of them below:

  • Credit union holdings are typically much smaller than banks. 
  • Credit unions are non-profit, banks are for profit.
  • Credit unions are cooperatives that operate to benefit the welfare of their members.  Banks are corporations that operate to maximize stock values and profit for stockholders.

Video: Banks versus Credit Unions

  • Credit unions are insured and regulated by the National Credit Union Administration (NCUA).  Banks are insured by the FDIC and regulated by several governing entities.
  • Credit union mortgage loan interest rates are on average .12% less than at a bank.
  • Interest rates on home equity line of credit (HELOC) loans are almost 2% less at a credit union than a bank.
  • Credit union interest rate earnings for CDs can be over 1% more than at a bank.
  • Interest rates for car loans are on average 2% less at a credit union than at a bank.
  • Not usually very many credit union branches for convenience as opposed to banks that often have several branches.

banks versus credit unions

Credit Union Member Advantages

Here are some advantages of belonging to and using:

  • As a member, if approved, you’ll get a highly competitive interest rate for loans.
  • Typically easier to get a loan as a member of a particular credit union.
  • Interest rate on average of .75% for checking , 3% for IRAs, 3.25% for 60-month CD with deposit of $250, rewards checking at certain credit unions of around 4.15%.
  • Minimal deposit to open an account. – $1.00 to $25.00.
  • Disclosure of information is more readily available at a credit union, since the credit union operates for the benefit of its members.
  • Typically locally owned, so service is more personal.

Video: The Difference Between Banks & Credit Unions

Disadvantages of using a Credit Union

banks versus credit unionsBelow are some disadvantages of using a credit union:

  • Not usually very many branches for convenience as opposed to banks that often have several.
  • Most are insured by the NCUA … but not all.  Check the NCUA website to make sure it is before you join.
  • Some do not provide the array of services available at a bank.
  • In some instances, you may not be eligible for membership – e.g., teacher’s credit union, state employees’ credit union.
  • May require a minimal monthly maintenance fee – e.g., $1.00.
  • Interest rates for savings are compounded very little, if any.

There are some other things you might want to know about credit unions that are important.  You can find the financial status of a credit union on the NCUA website.  Put the charter number of the credit union or other required information in the appropriate field, and it will provide you all the statistics for that particular credit union.  Remember to check with the NCUA to ensure the credit union is insured before joining any credit union.