The Credit Union Advantage

Nearly one-third of all Americans belong to a credit union. Frankly, we were interested to find out why that figure is not significantly higher. After all, credit unions seem to offer significant advantages over many banks: lower interest rates on loans; higher yield on deposits; low or no service fees; active participation in the community. The list is lengthy.

Probably the only advantage national banks continue to have over credit unions is accessibility. The major bank brands simply have more branches. However, credit unions have made great strides with their online services such as BillPayer, mobile apps, e-statements and personal financial managers. With all these online options, the need for face-to-face banking has diminished. Financial institutions that offer a solid combination of online and person-to-person should be equipped to handle the vast majority of member needs.

Let us dig a little deeper. 

Account fees

This may be the biggest knock on banks. They tack on whopping fees for items such as overdrafts and monthly maintenance. In fact, the average monthly account maintenance fee has leaped by 18 cents to $12.26.  That adds up to about $150 a year. Bank overdraft fees average more than $30.  Another fee that generates a ton of income for banks is out-of-network ATM charges, which average close to $3 per transaction.

Conversely, over 70% of the largest credit unions provide free checking. Some credit unions charge overdraft fees that cost $20 to $30 per incident. The average monthly credit union maintenance fee is between $2 and $5. However, credit unions typically do not charge the fee unless the account dips below $30 or less.

Clearly, consumers seeking to avoid high bank fees should consider moving their money to a credit union.

Interest Rates

With interest rates hovering around the puny to sub-puny level for quite some time now, it is difficult to find any institution that offers a high-yield rate that will help your money flourish. That said, credit unions clearly hold an advantage over national banks. You are far more likely to find higher yields on products such as CDs, money markets and savings accounts from credit unions. The low interest rates are good news for those shopping for cars, homes and credit cards. Loan products remain at amazingly low rates across the board. Once again, credit unions usually hold an edge over banks when it comes to loan rates.  

Customer Service

According to the most recent American Customer Satisfaction Index (ACSI), the overall customer satisfaction level for banks is 78 - a one-point jump over the prior year. Banks score the highest on "courtesy and helpfulness of staff," with a 91; and they score the lowest on "competitiveness of interest rates," with a 73.

Credit unions score another victory over banks in this category. The most recent ACSI report rates credit union customer satisfaction at an 85 -- a 3.7% rise over the prior report. Like banks, credit unions score the highest on "courtesy and helpfulness of staff," with a 93; and the lowest on "number and location of branches," with a 71.

With all this evidence in favor of credit unions, one has to wonder how banks have been able to maintain such a market share advantage. 

If you are reading this blog, you are most likely an AltaOne member. Here is your call to action: spread the word. Tell your friends, family members, co-workers and neighbors about the credit union advantage.  You do not have to pester them. Nevertheless, when the topic arises about a car loan, or mortgage or credit card ... or anything that pertains to the banking world ... put in a good word or two for credit unions and AltaOne. We appreciate the plug.

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Summer Financial Training School

Are the little entrepreneurs in your home working extra hard this summer to earn money with their lemonade stands and summer jobs? No matter what their ages, this may be the perfect time to teach your children about budgeting. Below are some valuable money management lessons you can provide your youngsters.

For younger children

Money As You Grow suggests children split their allowance into three labeled jars: one for savings, another for sharing and one for spending. If your youngster has not yet learned to read, try differentiating the jars with colored lids or have your child draw pictures that represent each jar. For example, if your daughter wants ice cream sometime this week, label the spending jar with an ice cream cone. The savings jar could have a picture of a more expensive toy or book. The sharing jar could have a picture of a gift she would like to give to a friend.  

When the ice cream truck rolls around, you can help them count their spending money and select a treat they can afford. Once your children have saved enough money for their more expensive item, you can take them to the store.

For preteens

Preteens should have their own savings accounts and make regular deposits. They should start planning long-term savings goals. Instead of saving for the next toy, they could set their sights on a tablet or a new outfit. To save effectively, you may need to help determine how much money must set aside to reach their financial goals in a reasonable timeframe.

Help your preteens set up a spending and saving journal. They may be tech-savvy enough to use some features of an online personal financial manager such as AltaOne's BudgetPro. If they feel they are not reaching their goals fast enough, this will help identify ways to trim expenses.

For teens

Teens will have more income and expenses to track. They will likely earn and save more money from part-time jobs or bigger allowances. They also have greater responsibilities and expenses -- gas for the car, movie tickets, beach trips or summer swimsuits. A detailed budget can help teens avoid over-spending and fail to reach their savings goals.

As parents, clearly communicate which expenses you will cover and stick to the plan. If you bail out your children every time they whine for cash, they will not learn to decide between "wants" and "needs" as they get older and must make crucial financial decisions. Encourage your teens to closely track their income, expenses and savings in a journal or online financial manager.

Your teens' saving goals should increase as college approaches. Spend some time researching the cost of attending college. Be transparent about what expenses you can cover, factor in any financial aid available and help them to come up with savings strategies for the rest of the costs.   

Cherise Fantus, NerdWallet

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Don't Let Student Debt Hamper Your Home-Buying Experience

We have all read the harrowing statistics about student loan debt. College grads enter the real world with an average of $34,000 in student loan debt. According to the Economic Policy Institute, the unemployment rate for recent graduates is 8.5%, and 16.8% are underemployed. With all these gloomy statistics, how can a debt-riddled Gen Y consumer even consider buying a home?

Cheer up, Millennials! There is hope. Check out these tips to help you to qualify for a home loan:

1)  Grow Your Credit Score
The best way to build a strong credit score is to pay your bills on time. If you have credit cards, keep a low balance. Try not to exceed 30% of your limit. It actually helps to maintain some credit card debt, if you want to improve your credit rating. Therefore, you may not want to pay off all your cards at once. Instead, keep an affordable balance, with manageable payments. Lenders often view this as "healthy debt."

You should also beef up your credit file. Having no credit score is sometimes worse than having a weak score. Avoid the "thin file" -- someone with no or very few items on their credit record. Some lenders offer "credit builder" loans specifically designed to help young consumers to build credit. Whatever lending options you choose, make sure you maintain a reasonable, affordable balance.  Also remember to check your score. Several agencies provide free credit reports. It helps to know how you rank with the credit bureaus. 

2)  The Debt-to-Income(DTI) Balancing Act
Lenders not only look at credit score — they pay close attention to the debt-to-income ratio, which compares your overall debt to your income. You should shoot for the lowest possible DTI ratio. If it is over 50%, you are carrying too much debt. If you have a high DTI ratio and can only make minimum payments, then lenders will hesitate to approve a loan that you may not be able to afford.

The best way to improve your DTI ratio is obvious— increase your income. Easier said than done, right? If you have a tough time making ends meet with your current salary, put in some overtime, take a part-time job or try to put your hobby to good use. Can you play an instrument? Maybe you can give guitar lessons. Of course, you can also ask for a raise, depending on your standing with the company.

The next best way to reduce the DTI ratio is to pay down your debt. If you apply a larger chunk of your income toward your debt, your credit rating will take a temporary hit. However, once your DTI ratio improves, your rating will sparkle, as well.

3) Consider Student Loan Payment Options
If your student loan payment still weighs you down, you may consider some alternatives. It may be possible refinance or consolidate your student loans. In addition, if you have federal student loans you may qualify for an income based repayment program. 

4) Pay Yourself
As you begin to control your debt, you will see your financial cushion grow. Start paying yourself. Determine how much you can reasonably save out of every paycheck -- and do not touch that money. As your savings grows, you might consider plunking it into Certificate of Deposit, which earn a greater return than a standard savings account.

5) Get Pre-Approved
As your savings account flourishes, visit your local AltaOne location and ask about a pre-approval. Pre-approvals help in several ways. You learn how much the financial institution is willing to lend, and you educate yourself on closing costs, down payments and other aspects of the home-buying process.

6) Patience, Patience, Patience
Life is a marathon, not a sprint. A house is likely the most significant purchase you make throughout your life. The responsibility of mortgage payments requires financial preparation and maturity. 

Good luck—and happy house hunting.

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