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"Credit Unions Are Beckoning With Open Arms"

Tuesday, June 22, 2010 - 2:54 PM
From the New York Times

Credit Unions Are Beckoning With Open Arms


Everyone can join a credit union, but not everyone can join any credit union.

This turns out to be a source of much confusion for consumers looking for a better checking account, a more generous credit card or a cheaper auto or home loan. By their very name, credit unions suggest exclusivity. After all, unions are something you have to join, and it isn’t always clear from walking by a credit union or running across one on the Web whether everyone is welcome.

But over the years, some of the biggest credit unions with some of the best deals have quietly opened up membership to everybody. This infuriates bankers, who must compete with them while also paying income taxes that the nonprofit credit unions do not owe. Consumers, however, ought to rejoice and take a closer look at some of the more aggressive credit unions, since there may be big savings for the taking once you realize you are eligible.

...Today, credit unions often (but not always) offer lower interest rates on credit cards and better deals on auto and other loans than most banks, though online banks often (but not always) offer checking accounts that earn more interest and charge fewer fees than many credit unions do.

Eligibility for credit union membership has evolved , though in every case members are supposed to have what is known as a “common bond.”

One way to become a member is through occupational classification, where credit union members work for the same employer or perform the same job.

The second is a community credit union, where members must live in the same “well-defined” region.

Things get murky with the third type, what is known as the “multiple common bond” credit union, which can pull in many different groups of eligible members as long as they are within reasonable proximity of the credit union. In the early 1980s, members of associations were allowed to join credit unions as part of an effort to include populations the banks were not reaching. “The idea was to get credit union service to people who wanted it from people who wanted to give it to them,” said Wendell A. Sebastian, who worked for the federal credit union industry regulatory body at the time.

In practice, this ended up opening credit union membership to anyone in the United States. About 10 years ago, the Pentagon Federal Credit Union approached the National Military Family Association and offered to let its members join the credit union. What PenFed really got out of the deal, however, was the ability to say on its Web site that if prospective members didn’t meet other eligibility requirements (like working for the Defense Department), they could join the military family association for $20 and become eligible that way.

In the years since, membership in the association has risen to 45,000, from under 10,000. How many of them joined just to slip through the side door into the credit union? “Probably most of them,” said Joyce Raezer, the association’s executive director. “It was a win-win for both of us, and it’s enabled us to do a lot more for military families.” The new members won, too, because they got access to products like PenFed’s excellent Visa Platinum Cashback Rewards credit card.

...Mr. Sebastian, the onetime regulator who also spent many years running the giant GTE Federal Credit Union, said he believed the bankers’ complaints masked another issue. “It’s all camouflage for the fact that they don’t like that there are institutions that are willing to work on a nonprofit basis,” he said. “When you don’t have to call Wall Street every quarter and cut rates on savings and raise fees so you can suck even more money out of customers’ pockets and put it in shareholders’ pockets, well, they can say anything they want. But at the end of the day, their goal is to take as much money from customers as possible and give it to stockholders.”


So many people haven’t gotten the message yet, that it’s worth repeating again, once more, with feeling.

Anyone can join a credit union.

And until the industry regulator stops allowing many of the biggest credit unions to offer services to anyone who shows up or logs in, you’d be foolish not to check out a few the next time you need financial services.
cactuscactus51 posts since
Jan 17, 2010
Rep Points: 384