Are Credit Unions Better Than Banks?

Lately it seems I've seen a few bloggers or  personal finance experts advocating joining a credit union over a bank.   It seems to be prevailing opinion that credit unions are generally better thank banks.   But I've wondered how much of this was just backlash against the "big banks" getting bailouts from the government and how much was really about credit unions being better.

I've been unconvinced that credit unions are all that great.  I've only been a member of a credit union once and I left them unhappy.  My father also had a problem with a credit union a few years ago.  My limited personal experience with a credit unions hasn't been positive.  But then I've never had a ton of success with banks either.  Eventually every bank will do something to annoy me.


I decided to do some research and compare banks and credit unions over all.    I should note that some of the data below comes from credit union organizations so it would be right to question if its biased, but I am trusting that they aren't publishing lies.


Interest Rates = winner Credit unions

Current data comparing rates between credit unions and banks is published at the NCUA site.

A Comparison of Historic Rates published at NCUA shows the rates for credit unions versus banks for 2003, 2004 and 2005.  In most cases the rates for credit unions were better than banks.  Here is a table comparing some of the rates for 2005 :

	Credit Union	Bank	Difference
36 month used car	5.62%	7.49%	1.87%
30 year fixed mortgage	6.38%	6.39%	0.01%
3 year ARM	5.55%	5.66%	0.11%
credit card	12.06%	13.27%	1.21%
6 month CD, ($10k+)	3.13%	2.88%	0.25%
Money Market	1.44%	0.99%	0.45%
Regular Savings	0.67%	0.67%	0.00%

On average you get better rates with credit unions over banks.

Fees = winner credit unions

According to the CUNA, the average NSF fee is $25 at a credit union and $30 at banks.   Average credit card late fee is $20 for credit unions and $35 for banks.


Better Customer Service = winner credit unions

The Ohio Credit Union League published an article that cites a Gallop poll of consumer satisfaction for banks and credit unions.

Percent of customers "very satisfied" were :
Credit unions = 73%
Banks = 58%
S&L's = 59%

The American Consumer Satisfaction Index has scores on industries.   The overall score for Credit Unions was 84 and the banks got a 75.   They have scores for individual banks and Bank of America scored 67, JP Morgan Chase got a 68, and Citibank got 68.   All other banks got a score of 80.   So the smaller banks did much better than the biggest banks in terms of customer satisfaction.

Other Considerations

Sometimes the location of a bank branch matters to you more than other factors.    The location and convenience of ATMs may also be a big deal for you.  But for some people neither of these really matter all that much.    The features and ease of online banking like bill pay or other online transactions may also matter a lot.  

Bottom Line:   Looks like over all that credit unions win on better rates and better service.    There may be other considerations that would cause you to go one way or another.   I'd do the comparison myself between credit unions in your area and banks.

15% off on Alice gift cards

I got an email from Alice.com advertising 15% off on their gift cards.   The discount is available until March 11th.

The standard prices on Alice.com aren't the cheapest.   For a few things I looked at Alice's prices were more expensive than Costco.   So its not exactly a bargain shop.   But it does have some benefits.

The key benefit of Alice is their Coupons.   Coupon deals on Alice can give you good prices.   For example some current coupon deals on Alice : Theraflu packets for $3.39 which are $5.79 at Safeway. Old Spice 'High Endurance deodorant for $1.87 compared to $2.99 at Safeway.  Crest Multi-care whitening for $2.06 versus $3.49 at Safeway.  Convenience of shopping online and free shipping.   Also you can buy US postage stamps on Alice.com so this is a way to get stamps at a discount.

 If you combine the coupon discounts with the 15% off on gift cards you can get even more savings.  For example, say I bought some of the Crest toothpaste.   Right now with the coupon it is $2.06 per tube.  With the 15% off discount that is $1.75 per tube.   Thats about 50% off the normal price at Safeway.

One catch with Alice is that you have to buy minimum 6 items at a time for them to justify shipping an order.  The products on Alice are all name brands and you can often get much better prices by buying generic or store brand equivalents.

Overall I have mixed opinion of Alice.  I think that if you use it right then it can give you some pretty good deals.  But don't assume you're getting the best price there.

I Like DIY A Little Too Much

I tend to have a negative emotional reaction to hiring work done around the house in most situations.   Its not that I want to do the work in fact I'm rather lazy to be honest. But I feel that I "ought to" do the work myself or that paying someone to do it is somehow not right.  Plus I always want to try and save money by doing work myself whenever I can.


Every time something needs fixing around the house my first inclination is to do the work myself.   I think theres at least a couple reasons for this reaction.   One of the thoughts that crosses my mind is "I can do that."   Another thought that I'll have is that "it would be expensive to hire someone".   These are my primary reasons for wanting to do work myself. 

DIY work can often save you money.   There is no doubt about that.  I've saved a lot of money by mowing my own lawn and painting my home among other things.   So some DIY is certainly a good idea from a cost saving perspective.  

The problem with my desire to do DIY is that its not always rational.  Sometimes I end up doing DIY work that I probably shouldn't.   Generally when I'm considering DIY I don't much consider whether or not I really want to do the work, if I have time to do the work, if I'd rather do something else, if I could make/save more money doing something else with my time or if I'd do a decent job doing the work.    These are all very good reasons to hire someone else to do something.   They may very well outweigh the benefits of cost savings.   But I seem to automatically choose to do DIY without a lot of consideration of the pros and cons.

Sometimes this inclination of mine to handle work around the house can backfire.   When I first got my house I signed up for satellite TV.   I decided that I would install the dish myself and save some money.   So I climbed up on my roof, installed the dish and then spent several hours failing to find a signal.   I eventually gave up and hired someone for $80 or so and they came out and had it running within minutes.   Then weeks or months later I started having occasional reception problems with my signal.   I first thought it was just outages from the service itself, but eventually my signal failed entirely.   I ended up on the roof again checking my dish and I figured out that I'd done a poor job of sealing a cable connection and water had leaked into the joint and ruined a cable.  All together my DIY efforts ended up causing me to waste many frustrating hours on my roof fiddling with the satellite dish and I didn't save any money.

 The fact that I feel I can do work myself is a big reason that I consider DIY at all.   If I know that I can't do the work then I don't even think of trying it.  For example I didn't attempt to fix my main water pipe when it broke and I didn't try to remove an overgrown 25' pine tree from my property.  I knew I didn't have the skill or equipment to do those things so I didn't think of doing it myself.  But if work is something I think is within my capabilities then my automatic reaction is to do it myself.  It think part of that may be a feeling that I should be doing things for myself.  I'm not sure if its an egotistical reaction that I would feel less manly if I hired a plumber to fix my sink or what.  But I seem to feel that if I can do something then I should do it.

Why is this a problem?    Well I already gave one example where installing my own satellite dish ended up wasting me a lot of time and effort.   So sometimes my efforts at DIY fail and I waste time and effort.   But another big reason why being to inclined towards DIY is a problem is that it causes me to be biased towards DIY.   I assume I'll save more time and money then I really do.   It makes my evaluation of whether or not I should do DIY out of whack and I make the wrong choices.   It is important to recognized your own biases or they will lead you astray.

Best of blog posts for week of March 5th

The Christian Science monitor wrote Who's poor in America? US tweaks how it defines poverty.
About how the government is going to adjust how poverty level is figured.  It should be more accurate and at the same time increase the number of people who are in poverty.  Click.  Now you're poor.

MoneySmartLife compares exempt and non-exempt work with Overtime Exempt Employee vs Non-Exempt Employee.

Darwin's Finance talks about  401K Loan Rules – Taxes, Interest, Pros and Cons and he points out that there is no "double taxation" on 401k loans.   A great explanation of 401k Loan Double Taxation Myth from The Finance Buff.



A story I heard about via Yahoo: Amazing Grace: Lake Forest secret millionaire donates fortune to college
A nice success story for buy-and-hold investing with dividend reinvestment.  She paid $180 for 3 shares of  "special" stock that 75 years later it was worth $7 million.   Thats about a 15% compound annual growth rate.   Not bad.  Wish I could have bought "special shares" of Abbot Laboratories (ABT) 75 years ago and held on to it for the past 75 years.

Updown performance February 2010 - S&P500 beat me by 1.8%

My Updown account is currently UP 0.97% in February 2010.  By comparison the S&P 500 was up 2.85% so I got beat by the index by 1.88%.

Thus far in 2010 I'm up about 0.8% which is 1.8% better than the S&P 500.

Since starting in March 2008 I'm up 5.3% while the S&P 500 is down 22.3% in that timeframe.

I bought some Freddie Mac and AIG stock in Updown at the end of the month.   I bought relatively small positions in both of them to test out short term speculating.  I've set limit sell orders to dump them once they've gained some.

Amazon Trade-In for DVDs

On Amazon they have a service called Movies & TV trade In.   I stumbled upon it the other day while looking for something on Amazon.  The basic idea is that you round up your unwanted DVDs or Blu-ray discs and mail them in to Amazon for store credit.  Amazon lists the simple steps of the process as :

1. Select Items, 2. Ship items FREE, 3. Get a Gift Card
I thought to myself that this might be an easy way to quickly sell some DVDs.  But I wondered if you'd get a good price for your DVDs doing this.

As a test I chose to check the trade-in value of the Sopranos seasons 1-4.   The trade in prices seemed OK to me.  But I wondered if I could get more money by selling the items myself via Amazon Marketplace or on eBay.  I decided to compare the Trade-In prices to what you could sell the DVD's for on the Amazon Marketplace or via an auction on eBay.   For the Trade-in program the prices are fixed.   For Amazon Marketplace I just used the lowest used price for the items.   On eBay I did a search of current auctions showing the ones ending soonest then took the minimum price on the first page of results.

Amazon Trade in values:
Season 1 = $3.50, Season 2 = $6.75, Season 3 = $10.50, Season 4 = $6.00 for a Total = $26.75
Amazon Marketplace values:
Season 1 = $12.72, Season 2 = $16.89, Season 3 = $17.48, Season 4 = $20.98 for a Total = $68.07  [-$14 fees]
eBay prices.  

Season 1 = $7.00, Season 2 = $10.00, Season 3 = $10.50, Season 4 = $19.50 for a Total =$47.00 [-$5 fees]

[edit:  I originally forgot to account for the fees you have to pay on eBay and Amazon Marketplace. Roughly speaking from what I can tell the fees on the eBay sales would be 25¢ + 8.75% cost you around $5 and Amazon Marketplace would charge $1 + 15% for about $14]

You can make a lot more money selling the items yourself on eBay or Amazon Marketplace.   Selling them yourself will take a bit more work and there is no guarantee they'll sell quickly.  But if you're willing to do a little work and wait a week or two to sell things then you can make a lot more selling items individually on Amazon Marketplace.

Amazon Trade-in doesn't seem to be a bad service, it does what it is supposed to.  But if you want to maximize the amount of money you get from DVD's then I wouldn't recommend it.

Personal Savings Rate History 1959 to 2010

You can get recent savings rate information at the BEA.   For the 4th quarter of 2009 the personal savings rate was just over 4%.   The personal savings rate is the percentage of personal income saved, so its the total amount saved / total personal income for the nation.

The Fed has historical data on the personal savings rate going back to 1959.    I plotted that data in the chart below to show the trend from 1959 to 2010.

From 1959 to 2010 the Average was 7.0%, the Median was 7.5%, the minimum was 0.8% and the maximum rate hit 14.6%.   From 1959 to 1995 the rate averaged 8.4%.  The average rate from 1995 to 2010 had dropped to 3.4%.