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THE BEST FINANCIAL advice I could give to a Gen Z or millennial is this: Join a credit union. But they probably wouldn’t listen.
A GOBankingRates survey earlier this year found that fewer adults under age 40 are banking with credit unions, instead preferring national or online banks by as much as a two-to-one margin. I’ve done all my banking with a local credit union for almost 18 years, and it’s provided me with a degree of personal customer service that’s likely less common with banks. This has been especially important when I’ve faced financial hurdles.
When I was in my late 50s, I was without a fulltime job for 18 months. I simply couldn’t find work related to my university degrees. During that period, I kept up with my mortgage payments but fell behind on the $280-a-month condo fee. When the condo association threatened to foreclose, I went to the credit union because it held my mortgage.
The credit union offered to add $4,000, without any interest charge, to the back of my mortgage to help me pay the fees that I owed. I had to commit to paying the condo fees on time from then on.
At the time, friends had suggested that I just walk away from the mortgage, especially because my condo’s value was then less than what I owed. My old-fashioned morality prevented me from doing so.
I was also worried that a foreclosure would affect my ability to qualify for another PLUS loan, which I needed to help pay for my son’s college housing costs. I wanted to make sure he could stay in the private university where he’d earned a full academic scholarship that covered his $36,000 annual tuition.
Staying put has proven to be the right decision, especially now that my condo’s value has been lifted by the booming housing market. While rents in my Florida town are soaring to new records, I’m still paying the same fixed-rate mortgage and condo fee that I have for the past 10 years.
How did my 18 months without fulltime employment end? Just as I’d exhausted all my savings and retirement money, a friend offered me a position at the university where I’d previously worked for 10 years. It had nothing to do with my skills or education, requiring only a high school degree. The pay was 40% less than my previous job. I would be earning what I did in my 30s, but I had no choice.
Still, in addition to a regular paycheck, the job provided medical insurance for my son and me, plus lots of paid time-off and more contributions to my state pension. Frankly, if I hadn’t taken the offer, I would have become homeless.
During my long stretch without a job, and then working for far less money than before, I almost maxed out a credit card from the credit union. It had an attractive 9.9% fixed interest rate but a higher-than-average minimum monthly payment. I didn’t want to fall behind on any bill, so I turned to the credit union again.
To help improve my cash flow, the credit union offered to transfer my high card balance without fees to a signature loan at a fixed 6.8% rate and a monthly payment of $200. In five years, my loan balance has been reduced by more than 85%.
I’ve also financed four used vehicles through my credit union during the past 17 years. Two were for me, and two were my children’s first cars, whose loans I cosigned. Each time, the credit union gave me the best rate and guided us so we’d know what car we could afford.
I always prefer to obtain financing before I shop. The credit union offered me my current car loan at just 2.44%. Thanks to a seller’s market and the loan payments I’ve made so far, I already owe thousands less than my car’s current resale value.
The GOBankingRates survey suggested that younger folks prefer an online experience for banking. But I rarely go to the credit union offices. I have a phone app that provides me easy access to current data on all my accounts. Last year, after my debit card number was stolen, the credit union suggested an app that immediately sends a text every time my card is charged, so I’ll know if it’s being misused.
At one time, credit union membership was limited to a group of employees or to certain industries. Today, most credit unions are open to all and growing in popularity—just not among the young. About 132 million Americans were credit union members in the first half of 2022, which is three million more than at the end of last year.
Earning higher rates on savings and paying lower rates on loans are the main benefits of being a credit union member. But based on my experience, I’d also recommend them for another reason—much better customer service than you’d get at most banks.
Ron Wayne spent 26 years working for newspapers in Pennsylvania and Georgia before becoming the editor in the University of Florida’s main news office. During his 10 years working there, he earned his master’s degree in mass communication and taught as an adjunct in the College of Journalism and Communications. Since retiring in 2020, he’s enjoyed a simple life, including reflecting on his experiences on Medium.com. Check out Ron’s earlier articles.
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For those that are married and have joint accounts the 250 K NCUA insurance is PER PERSON.
Technically I think it is per account, too.
Also, some money management places split amongst multiple institutions. For instance, the Fidelity money management account splits amongst 5 banks in the background, so it is actually up to $1.25 million in an account like that.
That’s the best FINANCIAL ADVICE??????? INDEXING IS!!!!!
Good article, Ron, and food for thought. My current “big national bank” account is linked to so many other places that the hassle it would entail makes me hesitant to change. But if in the future they ever make me mad enough, I’ll have to give credit unions some thought.
A lot of people think they need to join a large national bank for nationwide access to ATMs when they travel, not realizing that most credit unions are part of a reciprocal network where you can use other credit union’s ATMs for free outside of your home network.
I personally belong to both a credit union and an online only bank where the APY on the savings account stays above the national average. Large national banks pay next-to-nothing on checking/savings accounts while credit unions and some online-only banks pay much more.
I have several wonderful credit unions where I live. The companies treat their employees very well while providing excellent customer service. I have reservations about switching all of my finances to a credit union due to potentially more data security risk with a credit union vs a national large bank. If anyone has experience with this, I would appreciate feedback. The NCUA insurance does not concern me — I am referring to the risk of hackers, etc.
There should be no increased risk at a credit union vs a bank. Make sure you set up 2-factor-authentication no matter where your finances are at. (Bank, credit union, credit cards, brokerage, etc.)
All deposits up to $250,000 are insured equally by FDIC or NCUA. Both are equally as safe from theft or bank going bust.
I have had similar good experiences with a local bank. Shortly before my retirement I renewed a HELOC which mostly serves as an emergency fund backup and have had nothing but good experiences that go back to a $2K loan to buy a new car as I was returning from military service in 1974. Yes, a new AMC could be bought for under $2K.
My two years in the US Army made my adult son eligible to join a credit union that serves military, veterans and their families. My son has had great service from his CU.
Best, Bill
My twenty-something self thought that credit unions were best, for all the reasons you describe, plus, at the time, for their higher interest rates on CDs. When in 1991 the state of Rhode Island froze credit union accounts, mine included, I no longer was of that belief. It was not until multiple years later that my accounts were made whole (albeit with interest).
Moral of the story? Pay attention to the insurance on a credit union account. Credit unions do not have FDIC insurance.
My understanding – A federally registered CU is insured by NCUA up to 250K — State registered are not
My work credit union bailed me out right after college as I could not pay the deposit monies for the apartment rental, electric hookup and phone hookup. On day two of working, I deposited $5 to open the account and was given a $750 instant loan. That money saw me through the first several months of adult life – the loan allowed me to squeeze out a couple of sports coats and ties so I didn’t have to wear my one suit continously.
Thanks for this article. I wasn’t aware credit unions were as underutilized as they are. I’ve never belonged to a bank. When I was 12 years old, I opened my first savings account at a small (very small) credit union. In the 43 years since then, I’ve belonged to three other credit unions and always been happy with them.
Hi, this is Chris. Ron, I appreciate your honesty. And also agree with you about credit unions being a good thing. Just last week was talking to our son about joining one at his employer. Through the years, spouse and I found our CU the cheapest place to get a car loan.
I haven’t used a credit union in many years, but I agree with what you say. When I was working all my car loans came from a credit union, it was easier, you talked with people and less expensive.
The large bank I use these days is making it harder to do business in person. In the last year I’ve walked into a couple of nearby branches only to find all the tellers gone. Granted 99% of my banking is online or via an ATM, but still there are times you’d like to speak with someone.