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The Logic Behind CU Lending

You may think of a credit union as a member-owned financial cooperative. It is created and managed by its members, and profits are shared amongst the owners. A credit union is organized under a specific affiliation, be it a company, a region, or some other special relationship shared by its members. Credit unions offer many of the same financial services as banks. CU lending products may include car loans, home loans, personal loans, and others.

Credit Unions Focus on Members
Credit Unions are not-for-profit financial institutions. Rather than offer loans and other financial products that concentrate on earning a profit for the institution, as banks do, credit unions offer only those products they feel would be of benefit to their members. This approach results in a focus on consumer loans and services. Credit union earnings translate to:

  • Higher savings rates for members
  • Lower interest rates on loans

While credit unions follow many of the same guidelines and practices as banks, some of the vocabulary is different. For example, in a bank, customers make deposits. In a credit union, members invest in shares.

Responsible Financial Practices
While it may be true that credit unions prioritize service over profitability, it does not mean they are not concerned with making sound financial decisions. Just like any successful bank, a credit union must collect revenue, pay salaries for personnel, and compete with other lenders who offer the same or similar products. Oversight for a CU is provided by a Board of Directors. The Board is made up of elected volunteers who ensure that the credit union stays true to its principles and goals.

One notable difference between a credit union and a bank is cooperation between institutions. CU’s frequently work with one another and utilize tools to improve consumer lending and share resources in order to better meet their members’ needs. Whether it is a question of convenience, savings, or both, the bottom line rests with the service you get and your satisfaction as a member. Credit unions are invested in long-term relationships with their members.

Protected Assets
Similar to banks, member shares are federally insured, although the insurance is provided by a separate government agency. While bank deposits for individual customers are insured to at least $250,000 by the Federal Deposit Insurance Corporation (FDIC), credit union members’ shares are covered up to the same amount per member by the National Credit Union Administration (NCUA).

Types of Lending
The variety of loans offered depends on what the individual CU believes is most beneficial to its members and to its operation. Some of the most prevalent products include:

  • Auto and recreational vehicle loans
  • Home loans
  • Home equity loans and lines of credit
  • Construction loans
  • Personal and lifestyle loans
  • Credit cards

You may apply for a personal or lifestyle loan to cover a wide range of needs. These types of loans may be closed-end, with a specific repayment schedule, or open-ended, functioning as a line of credit. You can use this type of lending to pay for medical expenses that exceed insurance coverage, orthodontics, vacations, weddings, funerals, debt consolidation, or any of life’s unpredictable offerings.

The idea behind credit union lending, and credit unions themselves, is to provide financial support to individuals through thoughtful resource management and responsible lending. In essence, members are creating a cycle of financial sustainability by pooling their resources and using the money to lend to and borrow from one another when the need arises.

Credit processing is key for both online and traditional business

Today, there are more people who are either thinking about starting an online business or have already taken positive steps to do so. There may be many reasons, to do so, including a firm belief in a product or service, or a desire for financial independence.

No matter the product or service, an online business gives the owner control and access to lots of shoppers. A person who owns a traditional store is limited in the number of shoppers who visit the store. Here are some of the other common reasons why more people are starting online businesses.

Most traditional stores have a specific number of hours that they are open. However, an online business never closes, making it possible for the owner to make a sale even while he or she is asleep. In the online world, this 24 hour a day capability doesn’t take extraordinary effort, it just takes an online presence.

A person who owns an online business has flexibility when it comes to work hours compared to someone who owns a traditional store. While both kinds of owners may have to work late hours or on the weekend to get the job done, the owner of an online business can choose where that work can be done without worrying about taking time out to also oversee a physical store location. Managing contractors or employees may factor into the efforts of an online business owner, but unlike the owner of a traditional store, those contractors and employees can be based anywhere in the world, allowing the online business owner the flexibility to choose the most cost effective option to get the job done.

Someone who owns an online business is able to work anywhere with an Internet connection, including at home or while on holiday. Someone who owns a traditional store may also work at home, but if they are away on holiday, there is no easy way to mind the store from a remote location.

For both online and traditional businesses, one key process that has to be done well is collecting revenue from sales. When it comes to accepting credit cards, a traditional business has to have special equipment installed at every location where a sale may occur. Compare that to online sales, where the buyer provides the special equipment (their computer and browser).

In both the online and traditional store, once the sale happens, a credit card processor takes over the job of verifying the transaction and paying the business. The bottom line is no matter what type of business one has, it is important to have a reliable and secure payment process in place.

Written by Charge.com Payment Solutions, Inc., a trusted provider of credit card processing solutions for businesses. To equip your business with small business credit card processing, go to the company website to get started.

Considerations when using a prepaid card

If you want to have the convenience of a credit card, but you can’t qualify for a regular credit card, one option is a prepaid card, sometimes known as a prepaid debit card or a stored value card. The concept is the same. It looks like a credit card, and you can use it up to some limit. Like an ATM card, you can use up to a specific amount. Depending on your bank, you may also have the ability to go over the limit on an ATM card, and maybe pay some overdraft fees. However, with a prepaid card, once you reach the limit, you can’t spend any more.

You can can get a prepaid card that looks just like a credit card, including having a Visa or MasterCard logo. They may look like credit cards, but there are a few things about them that are different, and that my make them attractive or unattractive depending on your situation.

Key things to know about prepaid cards

Whether you will want to use a prepaid card will depend on your situation. Before you use one, here are a few things to consider:

  • No bills to deal with later since you are using money you already have.
  • You don’t need a bank account to get one.
  • Your credit history doesn’t matter, you just need to have cash.
  • There is usually a fee to activate the card or to add money to it.
  • You can use it instead of cash.
  • If it is lost or stolen, it likely can’t be canceled.
  • They are accepted at most places that accept credit cards.
  • You have to keep track of how much is left on the card.

One ideal use of this kind of financial instrument is as a reloadable credit card for students, especially if the student doesn’t have experience dealing with credit cards or ATM cards, or maybe has done so in the past but has shown poor decision making.

For this kind of student, especially someone like a college freshman who is spending time away from home for the first time, a prepaid card can give a young person the convenience of a credit card with responsibility of keeping track of finances, while limiting the financial damage if they exercise poor judgment and self control.

Tips on using a credit card abroad

In days gone by, taking a holiday overseas meant changing dollars for another currency or ordering a stack of travelers’ checks to cash in while on vacation.

However, consumers are increasingly opting to use credit cards while abroad to save the hassle of having to preorder currency, as well as to avoid the greater risks involved with loss or theft.

For those who opt to use a credit card while on vacation, it is advisable to take a couple of precautionary steps before leaving the US.

First, contact your credit card provider and let them know you will be going to a different country and plan on using your card. There have been instances of accounts being frozen after they were flagged up as possibly fraudulent due to transactions outside the US.

Second, ensure that you have your lender’s contact details, including the hotline for lost or stolen cards, and that you have written your card number and expiration date down. While this isn’t essential, it may help save time when you are in the midst of a crisis.

Credit cards are undoubtedly a very convenient way to pay for items when traveling overseas, but there are some downsides that need to be taken into consideration before using your plastic.

At home in the US, cardholders may be used to paying for purchases on plastic without any additional charges unless the retailer specifies otherwise, but while overseas, there are a number of different charges that can make any transaction more expensive than its cash equivalent.

Interest rates are often hiked up for any overseas credit card use and some firms can charge as much as 2% more in interest, just for the privilege of using the card abroad. This may not seem that much, but this is in addition to the other charges that firms may levy.

Two of the biggest names in credit cards, Visa and MasterCard, both add an additional handling charge onto any international purchases. This is usually in the region of 1% and is on top of the interest rate applicable to the account.

Withdrawing cash from a credit card is seldom a good idea and a policy best reserved for absolute emergencies, as it tends to attract a higher rate of interest or charges from the credit card firm.

However, using your flexible friend to get money from a foreign ATM is even more expensive than back home.

Cardholders can be hit with two sets of ATM fees – one lot from the ATM provider, which is usually in the region of $1 to $3 per withdrawal – and the other from the credit card firm who tend to charge around $2 to $7 for a cash advance from an overseas ATM.

It is not unusual to find the total charges from a foreign ATM amounting to between $5-10 per withdrawal – a hefty sum that soon adds up.

If all of the above weren’t weighty enough, cardholders are often penalized with poor exchange rates.

When an item in a foreign currency is purchased with a credit card, the currency must be converted back into dollars. The exchange rates applied to credit card transactions are notoriously low and usually among the worst conversion rates on the market.

Although credit cards are a convenient choice when going abroad and worth considering for not only their ease of use, but security, it is essential that the additional charges and interest are added onto the holiday budget to prevent a nasty shock when the bill arrives as the suntan is fading.

What You Need to Know About PayDay Loans

No matter who you are, if you live in the US you have been exposed to payday loan companies. Either you have used one to get a loan, you know someone who has used one, you have seen one of their offices in your neighborhood, or you have heard about them online, on TV, or on the radio. It isn’t just poor neighborhoods anymore. You can find them in the most exclusive Zip Codes in the country. If you don’t want to walk into one, you don’t have to. Online payday loans make it easy to use one in private if you don’t want your boss (or worse, your employee) walk into one.

Most personal financial advisers would suggest that you don’t use these services, and if you are using them now stop doing so. Why would financial experts recommend this, especially if you don’t have access to traditional loan sources like a credit card, bank, or credit union? If you know more about them, maybe their advice would make more sense.

What Is a PayDay Loan?
A classic payday loan nothing more than a short-term term loan where the company issuing the loan requires that you have a job with a steady paycheck before you get the loan. A payday loan may have other names, like a cash advance loan, check advance loan, post-dated check loan, or a deferred deposit loans.

The names may be different, but they all work in a similar way. The borrower writes a personal check payable to the lender for the loan amount plus any fees. The payday loan company the gives the borrower the loan amount (some may deposit the amount electronically into the borrower’s bank account), and agrees to hold the check until the loan is due, usually the next time the borrower gets paid. The loan (plus the fee) gets paid off after the next payday.

Payday Loans Are Very Expensive
If the loan is extended, or “rolled over,” you may be charged new fees or penalties, making it harder for the borrower to pay it off. How expensive can it get? For example, say you need to borrow $100 for two weeks. You write a personal check for $110, with the $10 being the fee for the loan. The payday lender agrees to hold your check until your next payday. When that day comes around, you either pay it off or rollover the loan until next payday. You may have to pay even more than $10 for this rollover fee. If you roll-over the loan several times, the finance charge might be half or more of your original loan amount.

Payday loans are much more popular with people who can’t get short term credit from their bank or credit union. Not surprisingly, payday loan businesses are much more common than banks or credit unions in poor neighborhoods.

Options to Payday Loan Companies

    Before you take out a payday loan, you should consider one or more of the following options:

  • Banks and Credit Unions: Ask if they have credit options that fit your needs. Even if they said no before, they may say yes now.
  • Community Organizations: A local community-based organization may make small loans to individuals or small businesses.
  • Cash Advances: A cash advance on a credit card or check card (typically an ATM card that can be used like a credit card) also may be possible, but it may have a higher interest rate than a regular bank or credit union loan.
  • Negotiate with Your Creditors: If you see a short term financial problem coming up, contact your creditors or loan servicer as quickly as possible if you are having trouble with your payments, and ask for more time. Many may be willing to work with consumers who they believe are acting in good faith. They may offer an extension on your bills; make sure to find out what the charges would be for that service — a late charge, an additional finance charge, or a higher interest rate.
  • Get Help: Contact your local consumer credit counseling service if you need help working out a debt repayment plan with creditors or developing a budget. Non-profit groups in every state offer credit guidance to consumers for no or low cost. You may want to check with your employer, credit union, or housing authority for no- or low-cost credit counseling programs, too.
  • Plan Your Spending: You can avoid going to a payday loan company if you take the time to understand your own finances. That means understanding how much comes in, how much goes out, and making spending decisions so you will have money left over at the end of the month.
  • Save More: You savings can help you avoid borrowing from a payday loan company in emergencies.

If you have not choice and have to use a payday loan company, borrow only what you can afford to pay with your next paycheck — and make it a goal to survive to the next payday without borrowing any more money.