Direct Deposit: Financial Opportunities from your Credit Union

Years ago, the idea of “direct deposit” was regarded with considerable suspicion. Employees thought their companies were somehow benefiting from this service. Some of them thought they were not in control of their money, and many felt that the system would somehow break down, and they would be without funds when expected, and they would not have a “real” check to prove they did have the money coming. Times sure have changed! Now it is a rarity not to have direct deposit services available to you. And more and more employees are realizing the considerable benefits direct deposit can offer.

When you receive a “paper” paycheck, you must take that check to your credit union to deposit or cash it. Depending on when you can arrange to physically take the check to the credit union, there could be several days of delay before the funds are deposited to your account. Not so with direct deposit. Funds are available in your account immediately upon deposit, and there is no delay in accessing them. Many businesses have their headquarters or payroll departments in a central location. Should inclement weather, or poor road conditions, or even a transportation strike intervene, the physical checks could be delayed by several days. Again, weather and other conditions won’t interfere with paying employees who receive their pay through direct deposit.

Another concern with paper checks has to do with theft. Would you believe that millions of Social Security and government checks of one kind or another are stolen or late or somehow misdirected each year? Weigh that against the 39 million Social Security checks direct deposited each year. It may be hard to believe, but NOT ONE of these checks has ever been lost. Some people worry that they will not know whether or not the correct amount has been deposited. They may not be aware that earnings statements are sent to those who receive their checks by direct deposit. So you do receive the information as to what has been deposited. You just don’t have to worry about making the physical deposit yourself.

There are more reasons to consider direct deposit if you are not using it today. If you can be assured that your funds are deposited at the earliest possible moment available, as they are with direct deposit, then your money is working for you at the earliest possible moment. Most credit unions have the ability to divide up your check and deposit some into your usual checking account, and some into various savings or investment instruments. And the quicker the deposits are made, the sooner you are earning money on them, right? Just another reason to convert to direct deposit.

Did you know that your credit union can even arrange to direct deposit your income tax refund? Well, it can. You simply need to fill in your credit union’s 9-digit “routing number” in the appropriate place when you do your return as well as your individual credit union account number. The routing number identifies your credit union. The account number identifies your own account within the credit union. Another reason to take this “route” with your tax return has to do with time-frame—-just like your paychecks. It takes 6 weeks or more to receive your “traditional” refund check. Using the direct deposit option the IRS provides can shorten that wait considerably. Some filers report receipt of their “electronic refunds” direct deposited in only 3 weeks. It’s your money. Wouldn’t you like access to it as soon as possible?

Now let’s talk about some other advantages of direct deposit. Have you ever heard, “pay yourself first?” Well, with direct deposit, you can designate several places to “send” your money on payday. And if you don’t have physical possession of that money, you are far less likely to spend it, frankly. If it’s in a savings account, or even paying off a debt, you may be less tempted to spend it on other distractions. What kind of debts can you address this way? Well, you can assign part of your direct deposited check to pay your car loan, your mortgage, or even your child support commitment each month.

Would it surprise you to know that more than 96% of credit union members have access to direct deposit? Well, it shouldn’t. Your credit union is there to serve YOU. You need only to stop into your credit union branch to set up direct deposit. It’s one more excellent service offered by your credit union.

Are Credit Unions Right for You?

You want to keep your money in a secure place, but stuffing rolls of bills in your mattress isn’t really your style? You might be thinking that a major banking institution is the only place to turn, but there’s another solution that could be (in some cases, literally) right around the corner. Credit unions are locally owned financial organizations that offer many of the same services that banks do, oftentimes with fewer fees and less stringent prerequisites for opening accounts.

Should you choose to put your money in a credit union? The answer to that question depends largely on what you are looking to get out of your financial institution. Naturally, different credit unions have different perks (such as free checking accounts) that might make them a more palatable option for some customers, but may not be as important a consideration to others. To help you decide, here are 3 reasons why a credit union might be the right choice for you:

1. If you want a say in how your financial institution is run

Supporters of credit unions are usually proud to point out that their organization is run in a more democratic fashion than most major banks. They are member-owned, meaning that when you join, you become a shareholder. Practically speaking, this usually means that most of the profit the organization makes is used to offer higher interest rates and lower fees to its members. However, it’s important to remember that a not-for-profit organization is not the same as a non-profit organization.

2. If you do most of your banking close to home

Credit unions are local institutions, and usually tailor their services to support the development of the community they serve. As a general rule, they lack the kind of national coverage that major banks have. This might not seem like a big deal, but if you’re travelling in a state far from home, you are unlikely to find an ATM from your local organization. However, some small organizations are part of shared branching cooperatives, where members of one credit union can utilize the services of any other organization in the network at no additional cost.

3. If your banking needs are (relatively) simple

If you are shopping around for a place to open a checking or savings account, a certificate of deposit, or for a personal or business loan, it makes sense to include the local credit unions in your search. If you are looking to create a high-powered stock portfolio, you are probably better off sticking with the major banks, who will likely have a team of seasoned investment specialists to guide you.

For some customers, a credit union offers the perfect mix of accessibility and service that they need. Your local phone listings or a quick online search should be able to provide you with the names and contact information for institutions convenient to your area. If you want, you can also ask a friend or a family member for suggestions and advice. Somebody you know should be able to point you in the right direction.

Credit Unions: The Cheaper Alternative?

The standard means of obtaining credit has become so widespread that being at the mercy of increasing interest rates and inflated charges on loans and credit cards has become so commonplace that it is easy to believe there is no other option. But there may be an alternative in the form of the little known credit union movement.

A credit union is a profit sharing, financial co-operative run democratically by the members of the union itself. And by offering a more financially attractive alternative to the standard products offered by banks, the popularity of the credit union movement in the UK is increasing.

As maximizing profits is not the key goal for a credit union, such an organisation has three main aims:

· To encourage its members to save regularly

· To provide loans and financial assistance to its members at the lowest rates of interest possible

· To offer its members help and support, if required, in the management of their financial affairs

To enable you to take advantage of the kind of services that a credit union offers, all you have to do is become a member. Not that this is quite as straightforward as you might imagine…

The key to becoming a member of a credit union is what is known as the ‘common bond’. The common bond determines whether or not you will be accepted as a member of a credit union and this could be that you reside in a specified area, work for a particular employer or within a particular trade, or that you are a member of a certain club or association.

Because of this, credit unions welcome everybody from within the common bond regardless of income, employment status or age and also – and perhaps more crucially, regardless of your credit rating or if you are unable to save a regular amount. So whether you have a poor credit rating or not you can still become a member of a credit union and save as little or as much as you like.

Irregular savers are just as welcome as those people who are able to save money on a regular basis and usually all members, regardless of the amount saved, are paid the same percentage annual dividend on their savings. Whilst generally paid at 2 to 3%, this can be as much as 8% depending on profits.

Using the sum of all members’ savings, the credit union is then able to provide low cost financial services to its members. Although each credit union (as all mutual societies) must ensure that enough money is set aside to ensure financial stability, all other profits are used to provide the lowest interest rates for members’ loans whilst returning an attractive rate of interest for its savers.

With an attractive 6% being the typical interest rate on loan repayments (which normally includes insurance at no direct cost), as the rate of interest that a credit union can charge is capped at 1% a month the most interest you would have to pay on a loan of £100 for example would be only £1 a month!

Insofar as government regulation is concerned, the Credit Unions Act 1979 remains the key legislation that regulates the activities of credit unions. As well as setting out the objectives of an individual credit union, it also mandates that all accounts are independently audited on an annual basis and that full insurance is put in place against fraud and theft.

Also, a given credit union cannot lend all the money saved as loans to its members and cannot invest any residual money in any ventures above a certain level of risk. To reduce the risk of bad investment and to ensure that all savers’ money is not tied up for long periods of time, any money in the control of the credit union must be put into bank deposit accounts, government bonds or other reliable investments.

Overall, credit unions offer an easy and convenient way to save and borrow and can provide a focal point for a community by bringing people together, to both help each other and to help the community as a whole. A credit union can also help to revive the economy of a local area as more money stays within the community which has a knock on effect on income for local businesses.

All you have to do is prove that you can save before any loan will be offered but once proven, financial assistance will be offered based on how much you can save or tailored to your individual circumstances. Paying into a credit union is also easy and can be done at local shops, convenient collection points, or can even be taken directly from your salary.

So is becoming a member of a credit union right for everyone? Before considering them it is worthwhile bearing the following points in mind:

· Regardless of which credit union offers you the best option, you cannot simply join whichever credit union you want. You have to fulfill the requirements of the common bond or at the very least, be a close family relation of someone that does and who is already a member.

· Credit unions are not just a means of obtaining cheaper loans. Although there is no fixed rule for all credit unions, generally you have to have saved with them before any assistance is offered and proved yourself to be able to save.

· A credit union does not provide the convenience of the high street banks as an individual union will typically have very few or sometimes no ATMs and few branch offices.

· Credit unions may not offer the range of services that you can get from your local bank so check to see what is on offer before you commit. Other services such as the return of cancelled checks etc. may also not be provided. It may be worth retaining an account at your bank alongside credit union membership.

· All money borrowed from or saved with a credit union must be in the name of a member and as such, no money can be borrowed in the name of your business. Even if you need money for your business you still need to borrow money in the manner of a standard member of the credit union.

If you above points do not preclude you from becoming a member of a credit union then the best way to obtain a list of the credit unions operating in your local area would be from the Citizens Advice Bureau or your local council. Alternatively there may be a credit union covering the particular industry/place of employment where you or your partner work so it may be worthwhile contacting your payroll department or trade union representative.

Although relatively small in size due to legal restrictions in place to prevent unfair competition with banks and other financial institutions, the UK credit union movement is growing in popularity and offers a real alternative to expensive bank loans or credit cards. Even if your credit rating is poor or non-existent, a credit union may be the right option for you.