If you are reading this you are probably already a credit union member, yet your primary financial institution may still be a megabank. So, I ask you, what has your bank done for you lately? Since 2008 banks have accepted hundreds of billions of dollars in federal bailout money, raised their already excessive fees to exorbitant levels, increased credit card interest rates, changed credit card terms and conditions, and tightened credit standards to a stranglehold. These actions are not the way to treat loyal members or customers and that’s not the way we do business at Members Credit Union.

Here is an example. Recently, a branch manager told me the story of a member who needed a check copy from another financial institution. The fee? $25! For a check copy that took the teller ten seconds to produce. At Members Credit Union, check copies are free when you use MCU@Home, our free home-banking product (and we will show you how to do this). If you ask for a check copy in one of our twenty branch locations you will be charged no more than $1 per copy (for $25, I would expect at least a song or dance while I wait for the photocopy).

Unfortunately, the megabank’s customer abuse does not end with high fees. Banks viciously fight government regulations that protect consumers. In response to the Credit Card Disclosure Act passed by Congress last year, banks quickly changed rates, fees, and conditions to circumvent many of the legislation’s clauses. What was MCU’s response? Our credit card terms and fees have not changed at all. Furthermore, when families and entrepreneurs needed loans at the end of the longest recession this country has seen since World War II, how did the banks react? By tightening credit standards. At MCU we actually encourage our members to borrow if they need a loan. Banks, on the other hand, have tightened credit standards to the point that you better have Bill Gates and Warren Buffet as cosigners if you want to be approved for a loan.

Why is Members Credit Union better? Unlike banks, whose directors are guided by their wealthiest shareholders, everything we do is to help our members. Credit unions are not-for-profit financial institutions. Since we are not-for-profit, earnings are returned to members in the form of lower and fewer fees, higher dividend rates, and lower loan rates. Our board of directors are volunteers who are democratically elected by our members. Each member’s vote is equally counted, not weighted by wealth. Since we are not driven by profit margin our fees and rates are favorable when compared to megabanks. The chart below illustrates this difference. Want to save money? Break up with your bank and move your money to your credit union.

If you are tired of being misled, mistreated, or just plain ignored by your bank then it is time to make a change. Break up with your bank. I know of a credit union that’s been around since 1953, who knows how to treat members well, is able to handle all of your financial needs, and they won’t charge you an arm and a leg to do it. Visit any Members Credit Union branch or call our Member Services Department. An MCU Representative will be happy to guide you through the process of moving your accounts. And, be sure to tell them Jack sent you.

Further Reading:

• Move Your Money: John McLemore, an MCU Member and Ask Jack reader, sent me the following link a few weeks back.  This site has many people thinking about moving their money and has added credit unions to their list of alternatives to big banks after their readers made the suggestion.

Christmas comes but once a year, yet the Christmas Spirit is alive and well all year round at Members Credit Union. Even during the rough economic times over the past twelve months – unemployment remains over 10% in North Carolina – the generosity of our members, employees, and the communities we serve has been outstanding. Because of your selfless acts of giving, no matter how small, Members Credit Union has been fortunate enough to help other organizations and make a great impact on the communities we serve.

One shining example of this spirit was MCU’s successful food drive for the Tri-County Christian Crisis Ministry in Elkin. On a Saturday in July, MCU employees collected non-perishable food items from patrons shopping at the Jonesville and Elkin Food Lion grocery stores. It was amazing and gratifying to see how fast the donations poured in. In no time volunteers had shopping carts overflowing with food and household necessities. What was even more extraordinary was the source of the donations. Ordinary people, who understand what it is like to struggle and many who were experiencing hard times themselves, gave as much as they could. To them, generosity was more important than the last dollar they had in their pocket. Because of these acts of selflessness, MCU volunteers were able to fill a pick-up truck with 1,039 pounds of food items and collect $683.63 for the Tri-County Christian Ministry.

The summertime food drive is just one instance of MCU’s enthusiasm for giving that is without seasonal boundaries. This past fall, MCU employees were in the spirit to raise money for the Juvenile Diabetes Research Foundation (JDRF). Employees held bake sales, special prize raffles, and participated in a Saturday two-mile walk to help drum up money and support for JDRF. Their enthusiasm was contagious. They inspired members to give and the result was a total of $9,075 to help find a cure for juvenile diabetes, bringing our three-year JDRF contributions to a total of nearly $27,000. Each donation was recognized with a colorful paper sneaker that was posted on the walls of branch lobbies in the Triad. At the end of the JDRF campaign, the halls at MCU were brightly decorated. Instead of boughs of holly the walls were decked with paper sneakers. The sneakers, just like the cans of food piled in the pick-up truck, were brilliant symbols of generosity that revealed itself in a time of need regardless of the season. 

So, on behalf of all Members Credit Union’s board members and staff, I thank you for the generosity you display every day of the year. It is because of you that Members Credit Union continues to be a champion for community service. 

Best wishes to you and yours for a safe and happy holiday season.

Last September, the credit crisis became official with the collapse of Wall Street mainstay Lehman Brothers. Although the Main Streets and country roads of North Carolina are far away from New York City we could not escape the aftershocks of this economic disaster. The stock market plummeted. Unemployment soared. Consumer credit dried up. Consumer confidence tanked.

Members Credit Union saw the pain on our members’ faces. We heard the worry in members’ voices. We wanted to help.

Over the next two months we modified 4,089 loan agreements accounting for $876,772 in member payment obligations, as part of our first ever Holiday Skip-a-Pay Program. This huge response only tells half the story. By allowing members to skip any non-mortgage-related loan payment, fee free, in November or December, we knew that we were providing precious wiggle room in their family budgets to make the holiday season a little bit brighter. The ability to touch so many members in such a meaningful way at such a critical time in their lives is what makes our positions at this credit union feel so special. True to our mission Members Credit Union offered members a hand up, not a hand out.

While there have been some signs that the economy has finally bottomed out, the unemployment rate in North Carolina has continued to rise. Members are still struggling through an uneasy economic climate, and again we feel obligated to reach out with more assistance.

Your democratically elected volunteer board has approved, and we are proud to announce, the 2009 Holiday Skip-a-Pay program. Just like last year, members can extend due dates on any non-mortgage-related loans for November or December – fee free. We want to make sure your holiday season is filled with family, friends, and joy – not financial worry. So, if this program will help your family out, simply call your nearest branch manager to get started. You may also contact our main office at 1-800-951-LOAN or loans@memcu.com.

We have been proving the credit union difference since we opened our doors in 1953. This program simply highlights why your Members Credit Union membership is so special. When times get tough for you we notice. We react. We do anything we can to help you get through.

In 1979 General Motors (GM) was the largest private employer in the country, with domestic employment peaking at a whopping 618,365. Worldwide, GM employed nearly 900,000 people. That same year, I started work as the new Treasurer for a 12,000 member, $28.9 million credit union in Winston-Salem called McLean Employees’ Credit Union.

This was a tough year for America, and it was not getting much better. Runaway inflation, recession, and a devastating oil embargo created a toxic economic environment for both businesses and consumers. GM car and truck sales plummeted 26%, causing the company to lose over $750 million in 1980. McLean Trucking Company was struggling with dramatically increasing operation costs and decreased demand for services. Although McLean Credit Union did its part to help both companies by giving Mr. John A. Clayton, Jr. a 1980 Chevrolet Chevette as part of a “Savings Express” contest the following year, it was becoming clear that the GM, McLean, and its credit union would require significant changes to stay afloat.

As I read about the GM bankruptcy in the news I can’t help but to think back to 1986 when McLean folded. Our members and employees were justifiably panicked, but we did everything we could to ease their transition to life after McLean Trucking Company. Thankfully, our credit union’s leadership had enough foresight to plan for this possibility, and started recruiting additional employer groups. Without increasing our membership base, our credit union very well may have collapsed with the McLean Trucking Company bankruptcy. Without this action, there is little chance that we would have had the resources to help the thousands of displaced truckers and support staff that we did.

Today, Members Credit Union is 51,000 members strong with assets topping $225 million. Our name is different, while our mission lives on. We have never been more dedicated to the credit union philosophy of people helping people. On July 1, we expanded our charter to serve anyone who lives, works, worships, or goes to school in Surry, Wilkes, or Yadkin county through a merger with Chatham Employees’ Credit Association in Elkin. This growth opens our doors to many more potential members and, more importantly, allows us to improve service offerings to all existing members. The opening of our Elkin office on July 1, our twentieth branch, is a perfect case in point.

I am optimistic that GM will do what McLean Employees’ Credit Union did, and make the appropriate, though painful, decisions needed to survive. If so, they may very well emerge leaner and more effective than ever. Their only chance at survival, however, is if consumers give buying American automobiles another chance. The federal government plans to back any GM warranty for vehicles purchased during the Chapter 11 Bankruptcy restructuring should the company go out of business, giving you some much-needed peace of mind. On top of that, there has never been a better time to find amazing deals on new or used American automobiles. Our credit union’s Invest in America program gives members huge discounts on Chrysler and GM vehicles.

If you are ready to buy a new vehicle, we can help. If you have an existing loan with another financial institution, we can help you with that as well. If you are looking for great rates on deposits, we can definitely help. If you have allowed us to serve you during this recession, or any other time in our 56 year history, thank you for allowing us to survive, thrive, and spread the powerful and distinct credit union difference.

Although Yogi Berra spoke the immortal words “It ain’t over till it’s over” in 1973, he just as well may have been talking about the credit crisis that began in the summer of 2008. Americans are desperately searching for signs that the worst of this recession is behind us.

Recent gains in the stock market, an increase in housing starts, a modest increase in consumer spending, and apparent stabilization of the banking system are tremendously positive indicators that sunnier days are ahead. Still, three quarters of North Carolina counties have unemployment rates above 10%, the overall U.S. economy is contracting at a 6.1% annual rate, and March saw the sharpest decline in consumer borrowing ever recorded ($11.1 billion).

Is the recession over? Not quite yet. The economy relies too heavily on consumer spending. Until unemployment levels return to the 6%-7% range, there simply will not be adequate consumer confidence to encourage the outrageous level of spending our standards of living require.

You see, the past ten months have been as much a crisis of panic as it has been a crisis of credit. Panic caused non-mortgage investments to plummet. Panic caused investors to sell assets at rock bottom prices. Panic caused employers to see more risk than opportunity. Panic has cost millions of Americans their jobs and homes.

That said, the worst of the recession likely is over. Instead of panicking, it seems that Americans are starting to come to grips with reality. We are making positive changes in our lives that have been long overdue. A shift towards thrift has been quite pronounced. A recent Gallup poll showed that 36% of Americans have begun saving more in recent months. A full 53% say that they are now spending less money, of which an overwhelming majority claims that this “new frugality” will become their new, normal pattern. Interestingly, 59% of respondents said that they enjoy saving as opposed to spending. Only 37% claimed prefer spending to saving.

We have definitely seen evidence of this paradigm shift here at Members Credit Union. Deposits in Money Market and Super 60 accounts are up markedly as members seek out our high dividends and financial stability. We have talked with many members who have finally gone through the process of looking through their bills, cutting unnecessary expenses, and finding ways to lower their monthly obligations. Our eBill@MCU service, debt consolidation loans, and auto loan refinancing service have been extremely popular with this group. Still others have decided to make large purchases based on value, not flashiness. Our low rate Visa credit card program and partnership with GM and Chrysler to offer huge members-only discounts on new car purchases through the Invest in America program have been popular with this group.

This recession has been painful for many of our members, but these days shall pass. In the meantime lean on your credit union to help you to make positive changes in your financial life. Contact any of our employees for advice on what deposit account, loan account, or savings program is right for you. We cannot control what goes on with the rest of the economy, but we can help you manage your household’s economy.

Recent economic turbulence has made it difficult to know where to go or who to trust for your financial services. The stock market is down, people are losing their life savings in Ponzi schemes, and banks are asking for billions of dollars of taxpayers’ money just so they can stay afloat. Other banks and investment houses have gone out of business entirely. With all the turmoil swirling around in today’s economy, isn’t it nice to know that you can still count on Members Credit Union to be there for you and your family?

Last week, I was startled to read that Wells-Fargo just had the most profitable quarter in the bank’s history – $3 billion! Bank of America recently announced that they are doubling the interest rate on millions of customers who carry a balance on their credit cards, and raising their ATM fees from $2 to $3 per transaction. US Bancorp has recently come under fire for checking account advance loans, short-term advances that charge the equivalent of 120% APR to their neediest customers. While the rest of the world is dealing with the realities of a devastating recession, banks, armed with billions of our TARP dollars, are seizing the opportunity to play the Somali pirate role with your hard-earned money.

Contrast these banking nightmares with what our members have experienced over the past several months. When our members were hurting over the holidays, we allowed them to, fee free, skip a payment. When banks were raising loan rates, we dropped ours across the board by seventy-five basis points. As competitors raise fees to record levels in the dark of night, our fee schedule remains public and unchanged.

We admit that Members Credit Union may not be the flashiest financial institution around. We don’t have opulent branches with lavish furnishings. We don’t have commercials on television every night, and we don’t sponsor professional golf tournaments. You won’t find a Members Credit Union corporate jet – in fact, you won’t even find an MCU corporate car. What you will find, however, is a credit union that cares about its members – one that always offers quality financial products and services at competitive prices. We opened our doors 56 years ago to provide members with a stable, yet rewarding, alternative to the usury of bank competition. Today, in the midst of financial sector mayhem, we remain the calm, safe, secure, and trustworthy rock you can depend on for the best overall deal in the market.

We don’t promise double digit returns on your money or that you can get rich overnight. As the Bernie Madoffs and all the others who have been caught running Ponzi schemes have proven, if it sounds too good to be true then it probably is too good to be true. We are the steady tortoises to those misleading hares. We promise solid returns on your investments, and the peace of mind of knowing that your money is federally insured by the National Credit Union Share Insurance Fund to at least $250,000. We also deliver sound financial advice so you can make the best decisions for your family and your future.

• We believe in a steady, systematic approach to savings and prudent borrowing to help you reach your financial goals.
• We recommend payroll deduction to make it easier to build savings nest eggs.
• We offer fee free checking accounts w/ free online bill pay and home banking.
• We don’t encourage you to borrow more money than you need.
• We don’t mail courtesy checks or pre-approval loan offers to entice you to excessively borrow money.
• Our loan officers leverage their experience and our excellent loan rates and terms to find the perfect loan for your needs.

Enough is enough! If you have any deposits at another financial institution, transfer your balances to Members Credit Union. Have a high rate loan with a bank? Refinance with us! Have family members or friends who haven’t experienced the Members Credit Union difference? Now is the time to encourage them to start earning more on deposits, paying less in interest and fees, and being treated the only way our employees know how – like respected and valued member-owners. Your wallet and peace of mind will thank you for it.

Recently released government figures reveal what many of you already knew – Americans have rediscovered the importance of thrift. The national savings rate in January jumped to 5% after checking in at around 0% as recently as last spring. The national spending rate has plummeted by 4.3%, the largest drop in almost 29 years.

This change has been so dramatic that economists are now lamenting the “paradox of thrift”. Essentially, the argument is that even though saving more and spending less seem like smart individual decisions, widespread thriftiness can actually worsen a recession. This makes sense. If consumers are saving more money, they are spending less on goods and services. If fewer goods and services are being purchased, manufacturers make less money and need fewer workers. As more people lose their jobs, there is less aggregate income and, thus, less money to spend. As this cycle is repeated, you can see how it could create a devastating economic pattern.

My problem with this argument has much more to do with psychology than economics. It was not long ago that the news was filled with headlines like “Americans spend more than they make” and “The United States is addicted to consumerism and credit.” The media blasted us for over-spending and under-saving. Don’t get me wrong, these warnings were well placed. It is readily apparent that consumers and banks overextended themselves for much too long.

It is interesting, however, to see how much that message has changed. Consumers are now spending less and saving more, but still being criticized by economists. All the while, those who have decided to spend have found that banks refuse to loan to them. Seems like we can’t win.

The key, as we all know, is to find economic balance. We each need to save enough to be feel comfortable and to protect ourselves from unexpected life events. We need to save for retirement, education, and down payments on big purchases. We also need to live a little – enjoy life. Family, friends, love, and laughter are assets that no balance sheet can classify, but they are vitally important nonetheless. We must keep our heads about us. Moderation, wise use of credit, and thoughtful budgeting go a long way in helping families avoid the potential risks of economic booms and recessions.

Members Credit Union was formed to promote thrift among our membership and to provide an affordable source of credit for provident and productive purposes. Thanks to sound investing, strategic planning, and increased member savings activity, we have never been in a better financial position in our fifty-six years of operation. Unlike banks, we are able and willing to lend and continue to seek ways to help borrowers meet their needs. We have lowered loan rates dramatically in recent months, and continue to offer among the best deposit rates you will find on the marketplace.

While other financial institutions are clamping up operations, we are committed to making this one of our most successful years ever. Take our Invest in America program for example. We are offering huge financing specials on new American-made vehicle purchases, not to mention members-only manufacturer discounts and rebates that could save you thousands of dollars on your vehicle. Look at our “What are you saving for” program that for the last year has helped hundreds of members become better savers and smarter consumers. Not only are we still passionate about helping members in this time of need, we are eagerly creating new ways to succeed in that mission.

So, keep saving. We can help you with that. Want to borrow? We can help you with that as well. Need financial advice? Let us know. Take comfort in our financial strength, and tell your family and friends to do the same.

When I started this blog last year, I had no idea what kind of response it would get from members. Would people visit? Would they comment? Would this turn into a center for discussion, or a public complaint board? No matter what I encountered, I reasoned, this little piece of the internet could be considered a success if members saw it as a legitimate attempt for Members Credit Union to host transparent, public discussions about their credit union.

I could not have dreamed that it would be so well received. I receive comments every week – some private, some public. All of them, however, have shown great respect and appreciation for what we are trying to accomplish with “Ask Jack”. During this time of corporate secrecy and public distrust, it’s nice to know that members see us for what we are: a member-owned financial cooperative committed to adapting to our members’ constantly evolving needs in an honest, and transparent way.

What has really made this initiative special from a personal standpoint is receiving comments like the one from Mr. Larry Creasman that showed up in my inbox this morning. Larry said:

“Hey there just wanted to comment the branch in Morganton, NC! One of my jobs is located in Morganton, and I frequent that branch quite a bit. You need to commend the staff at this branch! Every time I have ever walked in the staff showed respect and patience to my banking needs… As a property manager for an apartment complex I understand the importance of good customer service regardless of the service being provided. I usually don’t take the time to provide input about the service I receive at businesses, but I truly feel like this branch deserves a big thank you from your office! I appreciate your time in reading this and hope you enjoy your week!” – Larry Creasman

You can be assured, Larry, that your note will be shared with all of our employees – especially Rhonda and Jerry at our Morganton office. The experience you enjoyed in Morganton has been our goal since we opened our doors in 1953. Thank you for your note, and for the reminder of why we are in business.

Today’s “Ask Jack” question comes from Judy in Lenoir, NC:

“Does Members Credit Union award college scholarship money. If so, how do we apply?”

- Judy, Lenoir

Thank you for your question, Judy! This gives me the perfect opportunity to discuss one of my favorite service initiatives.

Members Credit Union’s Scholarship Program was established in 1996 to help members afford post-secondary education. To date, we have awarded more than 125 academic and need-based scholarships to members throughout the country. Last year alone, nineteen members were awarded with a total of over $22,000!

Annual awards are highlighted by the John R. Loftin Scholarship and the Daniel H. Elkins, Jr. Scholarship, named in honor of each man’s tremendous contributions to Members Credit Union over the years. In 2008 Megan M. Smith of Valdese received the $3,000 John R. Loftin Scholarship to help finance her Appalachian State University education. Andrew W. Foote of Morganton received the $2,000 Daniel H. Elkins, Jr. Scholarship for his studies at Georgia Tech University.

Scholarship applications for the 2009-2010 school year must be received by February 20, 2009. Eligible applicants must be Members Credit Union members, and enrolled or plan to enroll full-time in an accredited college or university. Applications are available on memcu.com or by clicking here.

Best of luck with your college plans, Judy. We look forward to the opportunity to help in any way that we can!

Today’s Ask Jack question explores the rate environment, and how Members Credit Union sets its rates.

Why when the Federal Reserve has hit historical low lending rate of 1% that the credit union raises their lending rates CAR 6.25% Best vs last months of 6.0% and the unsecured credit line 12.5% vs last months 11.75% it seems they are moving in the wrong direction. I would think at the least to stay pat.”

- Loren W.

To answer this question let’s first start with an explanation of what the Federal Reserve Target Rate (FFTR) is and what it is not. The FFTR is actually not even a rate at all. It’s is a target. The Federal Reserve’s twelve regional banks, after setting aside a mandatory level of deposits, makes overnight or short-term funds available to financial institutions to cover the ebb and flow of daily expenses (and, more importantly to meet mandatory reserve limits). The rate on these loans is determined by market conditions, which the U.S. Federal Reserve manipulates (via the buying/selling of treasuries, adjustment of reserve requirements, etc.) to meet the target rate. These bank-to-bank loans are as close to risk-free as loans can get. This is because these loans are: a) Extremely short-term, often paid back in full within several hours; and b) Extremely small in relationship to the borrower’s (a bank with millions of dollars on deposit) ability to repay.

This distinguishes overnight bank-to-bank borrowing from traditional consumer borrowing quite dramatically. That said, many financial institutions use the FFTR as an index by which they determine certain consumer loan rates. Take the “prime rate”, for example. Many consumers with home equity loans have a rate tied to “prime”. “Prime” is generally three percentage points higher than the FFTR. So, if the FFTR is 1%, “Prime” is typically 4%. If you have a home equity line of credit for “prime plus one,” then your rate is 5%.

Different types of consumer loans, though, are tied to different indices. First mortgage and student loans, for example, are often tied to the behavior of treasury bond yields. Because changes in FFTR do no necessarily affect treasury bond yields, these rates move up and down independently from the FFTR.

A component of the rate we attach to Members Credit Union’s unsecured variable-rate loans is tied to the 2-year Treasury note (T-Note). Each month from March 2008 to June 2008, 2-year T-Note yields actually increased. The good news is that since then, we have seen a marked decrease in that index. We expect this trend to continue, which will mean a likely rate reduction on unsecured variable rate loans when they are next adjusted January 1, 2009.

Secured, fixed-rate loans such as automobile loans are set by our rate committee based on market factors such as competitor rates, member demand, and our balance sheet. Historically, we have maintained extremely competitive rates. For example, the national average 60-month new automobile loan rate is currently 7.19%, while the national average used automobile rate is 7.67%. Our current rate of 6.00% on both new and used automobile loans (with 20% down and automatic payments through an MCU account) compares quite favorably to these figures, especially when you consider that the above national average rates assume a minimum credit score of 700.

Members Credit Union returns earnings to members in the form of lower loan rates, higher deposit returns, fewer and lower fees, and improved service offerings. This philosophy has mandated that our rate sheet gives members the best possible prices on loans and deposit products we can possibly offer. We spend a great amount of time and energy creating this scenario for members, and I couldn’t be happier with the results. Across the board, we are confident that our rates and fee schedule, combined with our branch footprint and service offerings, are the best deal possible for members.