June 10, 2013 — -- Last week I wrote about banks that offer high-yield checking accounts. This week I want to write about "un-banks"--in other words, credit unions. Hey, consider it equal time. It's no secret that banks got a bad rap during the financial crisis for their part in risky mortgage lending and for fees that many consumers view as unnecessarily greedy.
Perhaps that's why last year, credit union membership grew by 2 million people and credit union deposits topped $1 trillion for the first time ever, according to the Credit Union National Association.
Think of them as non-profit banks. That's what credit unions are, although they are not allowed to call themselves by that name. Unfortunately, the name they DO use, "credit union," is utterly confusing. Do they have something to do with credit cards? Only partially. Or unions? No. Are they private clubs that few people can join? No again.
These days anybody can join a credit union. There's always a way, and yet many people don't realize that. True, in the old days, you could only join a credit union if your employer offered one. That's still a great way in, but there are plenty of other ways to join. For example, one credit union I know of runs a charitable foundation in its community. Donate $25 to the foundation and you are eligible to join the credit union.
Why would you want to? Since credit unions are non-profit, they can often afford to offer their members lower interest rates on loans. They are also more flexible in listening to members' stories rather than just looking at their credit scores. So if you have imperfect credit, but there's an understandable reason for it, such as an illness in the family, or a recession-related job loss, tell your story and you may still get approved for a loan at a credit union.
What size savings might you find? Here's one example. I researched interest rates online for a $25,000 car loan. Banks were charging as much as 11.22 percent interest. The lowest rate I found was 4.25 percent and it was at a credit union. Over the course of the loan, the lower rate would save you nearly $2,000 in interest!
You don't have to break up with your bank altogether, although some people do. I encourage you to consider at least adding a credit union to your financial strategy. Americans seem to be catching on that credit union membership is a beneficial piece of the financial puzzle.
"Consumers have told us they want banking services delivered in a caring, low-fee environment," said McGraw-Hill Federal Credit Union President Shawn Gilfedder. "Credit unions across the nation help their customers achieve financial wellness... through a caring, needs-based approach."
Interested in trying a credit union? Click here and fill out the brief form on the right hand side of the page to find credit unions you can join.
This work is the opinion of the columnist and in no way reflects the opinion of ABC News.