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Credit Union vs. Big Bank

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  1. Jun 4, 2014 #1
    What do you guys think about the advantages/disadvantages of being at, say, BofA vs being at a local credit union?

    For a savings account and for loans, it seems that credit unions take the cake with their low interest rates and (relatively) bigger returns on savings.

    But for getting a credit card, an account at somewhere like BofA or Wells Fargo seems like a better deal. Or maybe it's better to get a credit card through a third party.

    I'm trying to decide how to manage my money (between spending, saving, paying back loans and investing). I'm also starting to build up credit (but don't yet have a credit card).

    Any advice and/or comments?
     
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  3. Jun 4, 2014 #2

    D H

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    With regard to credit cards, it's easy. Find one with no fees. Then find another. And then pay the full balance every month. No exceptions. Never, ever get stuck in the cycle of paying the minimum. That is the road to debtor's purgatory. If the statement says the balance is X, that's what you pay. That means keeping track of your expenditures so you don't get shocked with a bill you cannot pay.

    Why a second card?

    The key reason is that you'll eventually come across a restaurant or store that doesn't take Visa. Or Mastercard. Or whatever. Having that backup card means you don't have to keep a reserve of cash on hand. A related reason: sometimes, credit cards just don't work. The machine just won't read card X. It's a good idea to have card Y that the machine will read. This happens a lot with me. I have to get duplicate cards multiple times a year. I must be doing something wrong with my wallet. Or maybe my butt is magnetic?

    The second reason is that having multiple cards is very good for your credit score -- but only if you pay all of them off in full every month, and only if you keep the maximum balance below 30% of your credit limit on any one card. Having a second card help in that regard. If you watch what you spend, that second card shouldn't change your spending habits one iota. It will however reduce the maximum balance as a proportion of your spending limit. The maximum balance should occur at the end of the month, and you should pay that off in full.

    The third reason is that just in case you do get in a financial bind, that second card can help. It's a backup to your backup plan. (Your first plan should be to have some readily accessible cash, such as a bank account.) Just because you never use your backup plan doesn't mean you don't need a backup to your backup plan. I work with systems where triple redundancy is mandatory. The systems hardly ever fail over to the first backup, let alone the second. It does happen on occasion. It's good to have a backup to your backup. I have three credit cards, and I pay each of them off in full every month.
     
  4. Jun 4, 2014 #3

    Evo

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    Shop around for cards. I just got 2 cards from one of the US's largest credit card companies. No annual fee. No interest charges for 18 months. If I charge $500 in the first 3 months, they will give me back $200. I get 1% back on all purchases and 5% back on select purchases.

    I would be insane not to take these cards!
     
    Last edited: Jun 4, 2014
  5. Jun 4, 2014 #4
    Make sure you get credit cards with rewards. Use your cards for everything you can and ALWAYS pay the entire balance each month. I am able to use my points for a airline flight most years because of this.

    I personally use a credit union. They just have a better feel than a big bank. They also seem to have more regulations and I can have a say in management.
     
  6. Jun 4, 2014 #5

    Evo

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    Is paying off the balance each month really the best?

    http://www.bankrate.com/finance/credit-cards/paying-in-full-won-t-improve-credit-score.aspx

    It's all a confusing game to me, luckily I am not shopping for a mortgage or car loan.

    According to FICO, opening several accounts, charging a small amount on each and paying on time is the best way to increase your credit score. Just read that the other day, if I can find it, I'll post it.
     
  7. Jun 4, 2014 #6

    Vanadium 50

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    That's what the ladies tell me. :biggrin:

    The fourth reason is that you may be the victim of fraud or identity theft and your primary card will be locked while this is straightened out. You need another card while this is taken care of. I guarantee that this will happen at the least convenient time. It's important to put something on this card once a year. I find charitable contributions are good for this.
     
  8. Jun 4, 2014 #7

    jbunniii

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    My mortgage is with a credit union because of the favorable rates and almost complete lack of origination fees. I switched all of my banking from Citibank to my credit union in 2009 out of disgust with the bailouts. I figured that if I were to continue to bank with Citi, I would be tacitly supporting their continued existence. :frown:

    No regrets since then. Basically I get the same service level and lack of fees I had with Citibank, but I only need to maintain a $100 balance instead of $10k or whatever was required to avoid Citi's fees. ATMs and branches are not ubiquitous, but I do 99% of my banking online anyway, and I get cash at the grocery store if I need it.

    For credit cards, I don't think it matters much whether you go with Big Bank or Credit Union. There are deals to be found on both sides. I stick with my legacy big bank cards because they have been open for 20+ years, and account longevity is one factor that contributes to one's credit score.
     
  9. Jun 4, 2014 #8

    jbunniii

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    From a credit score standpoint, it doesn't matter, as long as a payment is made every month, the payment is on time, and you aren't using too much of your available credit.

    However, to avoid paying (often usurious) interest, one should of course pay off the full balance every month.
     
  10. Jun 4, 2014 #9

    Evo

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    Yes, longevity is a factor. I can't believe that paying off a card account and closing it actually is a negative. CRAZY.
     
  11. Jun 4, 2014 #10

    Evo

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    Well, that's a financial concern, not a credit score concern. What makes sense financially doesn't necessarily make sense on your credit score.

    Never make the minimum payment unless you don't care about money.

    Since these two cards have no interest for 18 months, and pay me to use them, I'm using them, but plan to have them paid off before the interest starts.
     
  12. Jun 4, 2014 #11

    lisab

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    I'm baffled at how the credit score is calculated. It's an outrage that they aren't 100% transparent about how they get that number, since the credit score can have so much influence on people's lives - even potential employers sometimes use it in making hiring decisions!
     
  13. Jun 4, 2014 #12
    Interesting. So then is it better for your credit score to build up a balance (and not pay things off all at once) for the first 12-18 months?

    For instance, if it's 0% APR for the first 12 months, would it be worth it to buy groceries (or whatever you normally spend on), then, instead of paying the full balance at the end of the month, pay it off gradually? Then after the first year, just pay the full balance off every month?

    (though D H's advice would indicate otherwise)
     
  14. Jun 4, 2014 #13
    For me, my score can fluctuate as much as 50-100 points depending on my debt to credit limit ratio is at the moment.
     
  15. Jun 4, 2014 #14

    jbunniii

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    At least it's an improvement over the situation 15-20 years ago when the credit bureaus denied that they even generated a numerical score.

    Now we have the opposite problem: there are different flavors of score that are used for different purposes, so the score you see when you pull your own credit report may not be the same one used by your potential lender, even if it comes from the same credit bureau.

    Still, imperfect information is better than no information...
     
  16. Jun 4, 2014 #15
    Chase Freedom? I think I'm going to apply for that one after I get my Bank of America card and spend the 500$ on that one to get those free miles. I've been exploiting those credit cards for a while. Just bought a roundtrip ticket to San Francisco (I live in Florida) and only paid 10$ taxes on it just for using my Delta Skymiles card. It has an annual fee, waved the first year, so I'm going to downgrade it to a non-fee card or cancel it before that annual fee kicks in.
    From what I've read, closing a credit card account lowers your score because it lowers your maximum credit limit. If you had 10k credit limit on that card, then that's 10k less of a total credit limit you have.
    Why that decreases your credibility? I have no idea. But there are some crazier reasons out there for your credit score being lowered. For instance, from simply trying to get credit; e.g. applying for a credit card.
     
    Last edited: Jun 4, 2014
  17. Jun 4, 2014 #16

    Evo

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    My daughter, Evo Child has a FICO account where she gets their reports (FICO is the actual credit reporting agency, but they're not cheap, if you even think about using services like credit.karma, READ THE AGREEMENT, don't want to say anything negative, READ THE AGREEMENT).
     
  18. Jun 4, 2014 #17

    Evo

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    Yes! WOOT!!! Get it. I was "pre-approved' and got large credit lines. It also allowed me to add Evo Child as an additional card holder and my credit goes towards building her credit, I was floored. Used to be additional card holders were not affected by the primary cardholder's payments. So I am helping her.
     
    Last edited: Jun 4, 2014
  19. Jun 4, 2014 #18
    Freedom is ok, but try your best for Sapphire Preferred. I use it almost exclusively. I love the Chase rewards system. It's the best out there.
     
  20. Jun 4, 2014 #19

    Evo

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    I only took the Chase because they were pre-approved and I wasn't shopping for cards.

    I once had pre-approved cards with $23K credit limits per card. My ex started forging my name to them and quickly racked up $292k in debt without my knowledge by changing the address of the cards to his office. I didn't even know I had these cards. I also believe my American Express had no specific limit.

    Then I found out about the accounts that were opened in my name...
     
    Last edited: Jun 4, 2014
  21. Jun 4, 2014 #20
    That is a huge credit limit. Who actually needs that much?
     
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