Sunday, October 12, 2008

Having Problems With Your Bank? Maybe you need a good Credit Union

Here's my attempt at writing a business article. See if you enjoy.

Times are hard, and you don’t need any newspaper article to tell you that. With banks holding back on loans because of the economic crisis, and the rest of the international market stepping on eggshells, it might seem daunting to try something new like putting your time (or capital) in a credit union.

But Affinity Federal Credit Union CEO and President, John Fenton, of Basking Ridge, has a hunch that you might want to give it a try.

“[We’re always saying], what can we help you do to put you in a financial perspective?” says Fenton.

This kind of help has kept Affinity out of the kind of hot water most banks are going through right now with the whole subprime issue.

“One of the secrets to why we’re doing well is that not everyone gets a credit card or a loan,” Fenton says, “We don’t have a lot of lending and we also don’t get involved in subprime lending.”
Subprime, which is when borrowers with low credit scores are offered high interest rates to compensate for the high risk it puts on the lender, is actually one of the reasons why banks are struggling right now with the currently busted economy.

But for Fenton, besides the whole subprime lending thing, banks and credit unions really don’t have that much different about them except for one key factor—“Credit unions are owned by its members, and don’t have any stock-holders owning it,” Fenton says.

In that way, credit unions are like manual stick shift to a bank’s automatic drive, where people are more aware and more in control of their money, and the managers who run the credit unions are more aware of their customers in turn.

“Here’s a good example of how I think a credit union is different than a bank,” Fenton says, “[With the mortgage situation] banks have adjustable rates, while we said, let’s get them [our customers] into a fixed rate, so our members were protected.”

Fenton says that not all of the members opted to take this option, though, as some decided to go their own way about it.

For those who did take the fixed rate option, though, it hurt the credit union in the short term, but helped out members in the long run, which basically helps the not-for-profit business stay afloat. Credit unions are considered not-for-profit for a reason, and that’s so the members can be served and kept care of, and not to maximize profits like a bank might do. In fact, according to the World Council of Credit Unions, “credit unions use excess earnings to offer members more affordable loans, a higher return on savings, [and] lower fees or new products and services.”

“We try to put people in things that will make them successful in the long run,” Fenton says.

That said, not everybody can just up and join a credit union, as there are a few things that keep it from being as easy to join as a bank.

“Federal charters are actually a bit more restricted than a bank,” Fenton says.

They’re restricted in the sense that only people who fall within the credit union’s field of membership can join. If you’re looking to join a credit union, you’ll have to see what the specifications are, as credit unions can tend to have different qualifications for their field of membership.

Some might be community based, where people who live, work, worship, or attend school in certain areas are eligible to become members. For Affinity, it’s occupational based, and you or a family member has to be an employee of one of the 1,800 different businesses or organizations that falls in the parameters of its sector.

“A credit union is a cooperative, which means that you’re participating in it,” Fenton says, “you wouldn’t join a Costco or a Sam’s Club without using it [your membership],” says Fenton.

The thing about a credit union, though, is that being a cooperative, a credit union can cooperate with other credit unions all across the country, making for collaborative networks between everywhere from California to New Jersey, creating a united base all across the nation.

“A bank borrows from the public sector,” Fenton says, “[but] a cooperative makes use of everybody’s deposits.”

You can have accounts in both a bank and a credit union without stepping on anybody’s toes, so there’s no real risk if you wanted to give both a try. And with the twentieth Affinity Federal Credit Union in New Jersey opening in Flemington soon, you’ll have plenty of more options to get started with a credit union if you’re actually interested in doing so.

All you have to do is give them a call or stop in one of their offices.

“It’s an easy process to have both,” Fenton says.


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