Current Topics

Credit union members immune to bad economy?
Five Financing Trends for 2011: How your startup could benefit from these funding sources in the coming year
Credit unions and small banks tops in service
Move Your Money: Where Populist Fervor Meets Friendly Faces
Steps to Prevent Identity Theft, and What to Do if It Happens

Credit union members immune to bad economy?

By Claes Bell, published on Bankrate.com

If everyone was a credit union member, would we be toasting the new economic recovery instead of wallowing in the same malaise we've been mired in since 2009? A recent survey shows consumers who bank at credit unions have a more positive view of their personal finances than those who don't:

According to credit union data released from the (Discover U.S. Spending Monitor) in September, 38 percent of credit union members rate their personal finances as good or excellent, compared to 30 percent amongst noncredit union members surveyed. Just 17 percent of credit union members rate their finances as poor, while 29 percent of noncredit union members feel the same way.

Both groups also differ when it comes to whether their personal financial situation is getting better or worse; 48 percent of credit union members feel their finances are worsening compared to 51 percent of noncredit union members, a 3-point difference. Twenty-one percent of credit union members feel their finances are getting better compared to 19 percent of noncredit union members, a 2-point difference.

What's more, credit union members report an objectively better financial situation than their bank-only counterparts. More credit union members report having money left after paying monthly bills (52 percent vs. 44 percent) and more willingness to spend on discretionary items and home improvements (15 percent vs. 14 percent).

The correlation between doing well financially and belonging to a credit union is interesting, but it's hard to know if there's any causal relationship. In other words, does belonging to a credit union give members such a big financial advantage over nonmembers that they'll be that much better off financially, or are people who are better off financially just more likely to join credit unions?

Sure, credit unions typically offer more generous interest rates on both loans and savings accounts than their bank counterparts and to charge less in fees (NSF fees are about $5 less at credit unions than at banks). But I doubt those benefits are enough to explain such wide gaps in consumers' sense of financial well-being.

More likely, I'd say, is that because credit unions can't typically spend as much on marketing as their bank counterparts, those consumers who do belong to credit unions tend to have sought them out because of those more generous rates. Also, credit unions don't have the resources to put an ATM on every street corner and a branch on every street like some of the larger banks, forcing consumers to give up some measure of convenience to do their banking at a credit union.

It follows then, that credit unions are attracting a consumer who is more proactive and diligent when it comes to financial matters, and one who is willing to do a little more legwork and sacrifice some convenience to get credit unions' better deals.

Regardless, the upshot here is if you're a member of a credit union, you're in good company financially. Why do you think credit union members are doing so much better than nonmembers? Is belonging to a credit union that much more of an advantage?

Five Financing Trends for 2011
How your startup could benefit from these funding sources in the coming year

By Eileen P. Gunn, Entrepreneur

When it comes to funding options for startups, new ideas seem to come along every season. Some may be old ideas dressed up in a new way, while a few may be something we really haven't seen before. It isn't certain which ones will become the new black of small business and which will disappear with this year’s hemlines. But here are five financing trends for 2011 that could have an impact on your company.

1. Crowdfunding

Kickstarter popularized the idea of crowdfunding, which is when a large group of people help fund a project or business through a cluster of small donations. Kickstarter began as a new way to help artists get projects off the ground. In return for funding, donors receive goods or services, or even just a well-crafted thank-you, in lieu of equity or interest payments. Now the same idea is spreading to business ventures. Diaspora, a tech company that wants to build a social network to rival Facebook got more than $200,000 in seed money from a Kickstarter campaign.

Of course, the Securities and Exchange Commission frowns on companies offering equity to the public without filing with the government to do so, so when it comes to crowdfunding backers always get something other than equity. Take Catwalk Genius. Its members fund fledgling fashion designers and in return get a share of the revenue generated by the designer’s clothing lines. Then, there's Indiegogo, which leans toward creative and tech business ventures, and peerbackers.com, a community of people specifically looking to support entrepreneurs, which are similar to Kickstarter in that they encourage preselling products as a way to raise funds. Look for more niche-oriented crowdfunding sites in 2011.

2. Microlending

The idea of offering very small loans, even just $100, has its roots in helping women in underdeveloped countries start small business ventures. But as the recession tightened credit offerings, the popularity of microlending has extended to the U.S. -- especially as aspiring entrepreneurs are starting ventures with far less than the $50,000 business loan threshold common at many banks. Not-for-profit Accion is the largest organization putting that idea into action with loans that start at $500 and average a little more than $5,000. You can also research other microlending programs around the U.S. through the Association for Enterprise Opportunity's searchable database.

3. Credit Unions

These cooperative financial institutions are among the most active in making smaller loans to entrepreneurs and have only gotten busier in recent years, according to the National Credit Union Administration (NCUA). Its figures show credit unions made more than $33 billion worth of business loans in 2009, up from $12 billion in 2004. They have relatively low default rates and terms that are often better than traditional banks, according to the NCUA and Federal Deposit Insurance Corp. (FDIC). Credit unions also can be a resource for aspiring business owners whose credit score might not pass muster with other banks. The catch? You will likely have to become a member of the credit union to borrow from it.

4. Bootstrapping

If you’ve trimmed your start-up costs down to a few hundred or a couple thousand dollars, why not skip the loan altogether and bootstrap your business? When you tap personal savings, get vendors to front start-up supplies for delayed payment terms, hit up friends and relatives, or use one money-making venture to fund another, then you’re bootstrapping. It’s a good way to test an idea and make sure it has legs before investing heavily in a new venture. Think of it as the business equivalent of going retro. It’s an idea that has been around forever, but is making a big comeback as people who have lost their jobs in the recession increasingly look to start a small business as an alternative to traditional employment.

5. The Slow Money Movement

Woody Tasch, longtime chairman of Investors' Circle, a hugely successful angel network for socially responsible companies, is spearheading the fledgling slow money movement. Its ambitious aim is “a million Americans investing 1% of their assets in local food systems within a decade."

The idea is to help entrepreneurs who buy, use and sell local food or who engage in sustainable agriculture get seed funding from people they know in their communities. The terms are set on a deal-by-deal basis, which can range from a loan to equity to a credit extension. Backers are encouraged to invest in ventures that won’t just turn quick profits but will benefit their communities over the long term by creating jobs, supporting other local businesses and the fostering local food chain.

It’s ambitious and will likely evolve as it goes. But in its early days so was Investors' Circle, which has facilitated over $134 million in investments in more than 200 companies since 1992. We’re interested to see how Tasch will sustain this movement.

Credit unions and small banks tops in service

By Claes Bell, published on Bankrate.com

If you bank at a small bank or credit union, you're probably a happier and more loyal customer, at least according to a study published this month by Prime Performance.

The study found 87 percent of credit union customers and 86 percent of small bank customers (banks less than 300 branches) were satisfied with the service they received. Banks with between 300 and 4,000 branches did less well, with 74 percent of their customers expressing satisfaction with their service.

Of the three big banks the study singled out -- Chase, Bank of America and Wells Fargo -- Chase did the worst, with only 67 percent feeling satisfied with the bank's service. Overall, 77 percent of banking customers were satisfied with the level of service they got.

Small banks and credit unions also scored higher than large banks in customer loyalty and the likelihood they would recommend their financial institution to their friends. A dismal 52 percent of Chase customers would recommend the bank to their friends, followed closely by 54 percent of Bank of America customers. In contrast, 83 percent of credit union customers and 78 percent of small bank customers would spread the word to friends about their financial institutions.

The Credit Union National Association couldn't help doing a little crowing over the results:

"The Credit Union National Association (CUNA) is not surprised at the finding, because this confirms what study after study have found," Bill Cheney, CUNA president/CEO, told News Now. "It's fine to be included with 'small banks' in a survey such as this. However, it's also important to note the very real and fundamental difference between banks and credit unions, regardless of size: Credit unions' not-for-profit, cooperative structure.

"Ultimately, that's what separates all credit unions from the rest, and drives their passion to provide the best service to their members, rather than amass profits," he added.

The thing that seemed counterintuitive to me about these numbers wasn't that credit unions and small banks have happier customers; it was how high the numbers were all around.

For all the horror stories I hear about banks in the media and from friends, it seems remarkable that so many people are pleased as punch with the service they're getting from their financial institutions. I mean, I know a lot of people like credit unions, but an 87 percent satisfaction rate for customer service? A 77 percent satisfaction rate for service in the industry at large? Bet you wouldn't find a number that high in the telecom industry.

Trying to square that circle, the best I could come up with is that banking is a competitive business. If you really hate your bank, it's easy enough to pick up your checking account and move, so there's not much reason to stick around if you're truly dissatisfied.

What do you think? Are customer approval ratings so high for financial institutions because they're just flat-out awesome, or because it's so easy to dump a financial institution you hate? Or is there some other reason I'm missing?

Move Your Money: Where Populist Fervor Meets Friendly Faces

By Julian Hattem, published on www.HuffingtonPost.com

Huge bonuses to bank executives, casino-style financial practices and millions of unreturned stimulus dollars have made many consumers angry at the nation's biggest banks and looking for a way out.

Daniel Mica knows just where they should go. The president and CEO of the Credit Union National Association said in an interview with the Huffington Post that he hopes "the cold shock-wave" of populist fervor sweeps the financial system and leads customers to credit unions.

And consumers will find that switching won't just be an effective protest, it will also be a change for the better, he says. "At a credit union they treat [you] like a person, not a number," Mica said, because smaller financial institutions don't have the "dismissive arrogance" of the largest banks.

Indeed, more and more people are joining credit unions every day. Mica said that over the last year credit unions have had a two percent growth rate -- higher than the population rate, and the quickest pace that credit unions have seen in a decade -- and searches to find local credit unions have tripled in recent weeks.

The move reflects a growing disillusionment with the nation's largest banks, a sentiment that has been captured by the Move Your Money campaign, which urges people to close their accounts with the six big banks that engaged in sophisticated financial maneuvers and move to a safe and solvent community bank or credit union. It urges people fed up with the big banking system to take politics into their own hands.

It's "the beginnings of people voting with their feet and their wallets and taking money out of banks," Mica said. "And we hear stories [like that] every single day."

He can appreciate the movement's grassroots growth. "It's not just Democrat-Republican, I think that's clear," he added. "I travel the country on behalf of credit unions. We have 93 million members. I've been to every state in the United States multiple times and I listen to Main Street every single day. People are very upset. We talk finance, we talk pocketbook issues, and they're very concerned." He's praised credit unions on YouTube as well.

As to those stuck with the big banks because of their mortgages? "What they need to do is pick up the phone or get on a website and go to their local credit union," he said, "and ask if someone will come down and talk to them about moving their mortgage and what they can and can't do."

The movement is not about destroying the big banks in general, he said; more like putting them in their place: "This country needs a strong financial system including banks and credit unions, but when banks become impervious to public concerns, to the crying needs of America's economy and go off on their own, they need to have their hands slapped and they need to be redirected. We didn't have this situation for a long time in this country, but they became so powerful with so much money that they were able to get their way in Congress and with the regulators for the past dozen years, that they've gotten out of control. And this is all about getting them back in the box and serving America and consumers, not just themselves."

Unlike banks, credit unions are not-for-profit enterprises owned by their members. They pride themselves on lower loan rates and better savings rates, but membership is not open to everyone (though the vast majority of people probably can find a credit union for them, qualifications vary and can be based on employment, residence, religion or some other category -- people should check with their local credit to see if they are eligible). Like banks, they are insured by the federal government (the National Credit Union Share Insurance Fund). People can use the CUNA's website to find nearby institutions.

"We'll always find a complaint here and there about a credit union, but 99.9 out of 100 people are happy to put a bumper sticker on their car that says 'I love my credit union,'" he laughed. "That is not the case about banks."

Steps to Prevent Identity Theft, and What to Do if It Happens

By Elisabeth Goodridge, published on www.nytimes.com

Identity theft is not just an unauthorized charge on a credit card anymore.
Identity theft, according to the Federal Trade Commission, “occurs when someone uses your personally identifying information, like your name, Social Security number or credit card number, without your permission, to commit fraud or other crimes.”

How your information is stolen, and how it is used, varies greatly. With stolen Social Security numbers, thieves are filing false medical claims, applying for mortgages and opening lines of credit for fictitious businesses. By adding fake fronts onto A.T.M.’s or gas pumps, they are collecting credit card numbers and PINs.

But while the trade commission estimates that nine million Americans are victims of some sort of identity theft each year, these extreme cases of identity fraud remain rare, luckily.

You may find that you will need only to close a compromised account or freeze your credit if errors appear. But recovering from the effects of an extreme case of identity theft can be incredibly messy and time-consuming. You could be denied a mortgage, for example, or refused new lines of credit. It can take months or even years to repair your credit history, and this type of crime is hard to prosecute.

While financial institutions, health care companies and other organizations have taken steps to improve security measures in recent years, do not rely on them to protect you. Taking some common-sense steps now can help prevent major headaches later.

PREVENTION
Your first step should be to review monthly statements from your checking and other financial accounts. The earlier you catch an error, the easier it is to resolve it. Yes, balancing your checkbook may seem a monotonous chore, but understanding where your money goes will help you spot any irregular withdrawals or charges. Reviewing your credit card bill each month is critical as well, especially if you charge a lot of your daily purchases. If you have not already, this may be a great time to sign up for online accounts. It’s easier and faster to review accounts online, on a computer you trust.

Next, order and review your credit reports. The three credit agencies, TransUnion, Equifax and Experian, are each required by law to provide you one free credit report a year.

AnnualCreditReport.com has links to all three, and it is the only place to get them free. (Other sites may try to charge you or get you to sign up for monthly services of some sort.) Stagger your requests, and you can monitor your credit history every four months. While you are at it, make sure your name, address and other information are correct. If you find old or inaccurate information, have it removed.

While companies like your health care provider are no longer printing Social Security numbers on member identification cards, a lot of personal information is still out there. Be sure to shred old bank statements, applications for new credit cards and other documents that have personal information.
Secure your personal information online and offline. Do not carry your Social Security card in your wallet. Keep it at home with your other important documents. Be careful about online passwords as well and change them often. And be vigilant about sharing personal information when opening new accounts online. If online advertisements or offers seem too good to be true, they probably are.

ACTION
The steps you will need to take to recover from identity theft depend on the type of fraud you believe has occurred. If you are going through your monthly statements and see an error on an existing credit card, monthly bill or financial account, first call the company to report it.

By federal law, credit card companies have strong consumer protections in place, and they have large departments to investigate fraud. For that reason, you may want to consider using a credit card to pay for online and major purchases. That will give you more protection than if you use a debit card, because the money comes directly out of your bank account when you use a debit card. Making purchases with a credit card provides a layer of protection.

Once you have reported the error and determined there is reason to believe a fraud has occurred, the Federal Trade Commission recommends that you place an initial fraud alert with one of the three major credit reporting agencies. (They are required by law to report the fraud alert to the other two agencies.) The alert, which remains on your credit report for 90 days, automatically entitles you to a free copy of your report. Review this for any accounts you did not open or activity you did not conduct, and confirm that the report has your correct name, address and Social Security number.

Once you have determined that a fraud has occurred, you should also file both a complaint form with the trade commission and an identity theft report with your local police department. And you should file these complaints if you see any new accounts on your credit reports that you did not personally open.

After you have filed the reports, make multiple copies of them and save the originals in a safe place. While identity theft is hard to prosecute, these documents will help you investigate your case with the credit agencies and the financial institutions you do business with. Filing with the trade commission may also provide you with certain protections. In addition, law enforcement may use your information in their identity theft investigations.

Depending on the severity of your situation, you may want to consider the second type of fraud alert. The initial alert, which is recommended if, say, you lose your wallet, requires potential creditors to take certain steps to verify your identity before opening new accounts in your name. The extended fraud alert, which lasts seven years, requires creditors to contact you personally before new accounts are opened.

But there is one thing to remember: Fraud alerts help only when a thief is trying to open a new line of credit. They may not prevent a thief from using existing accounts or ordering new cards. Nor can they prevent the opening of a bank account or another account that does not require a credit check.

While they are different in each state, credit freezes are also available. When you place a freeze on your credit report, businesses and creditors cannot check your credit history unless you temporarily lift the freeze. The cost of freezing your credit, the cost of thawing it temporarily and the rules on who can freeze their credit depend on the state.

Regardless of the severity of the problem, be careful when you contact the companies of the compromised accounts or the accounts you think have been tampered with. While the level of risk varies because of credit limit, credit history and other factors, your credit score may be negatively affected if you choose to cancel credit card accounts. Inform the creditor that you have reason to suspect you are victim of fraud, and ask it for the company’s policy in situations like these. One option is to ask that the account be assigned a new number. Another option, when contacting credit agencies, is to place a 100-word consumer statement on your credit report explaining the fraud. This statement will stay on your credit report as long as you want.

And again, be sure to get documentation on all of your conversations and interactions with these lenders.

EXTRA HELP
In recent years, the three main credit agencies — and other companies as well — began offering credit monitoring and identity fraud services for monthly or annual subscriptions. Some companies even offer identity theft insurance. Prices and services vary, but over all, the agencies promise to monitor your credit report and send alerts if any questionable activity is found.