Credit Union vs. Bank FAQ
Topic: FAQs
Credit Union vs. Bank FAQ

Q: What is the difference between a bank and a credit union?

A: There are several differences:

1. A bank is open to the public so anyone can join (except for a few rare exceptions) while a credit union is open only to those who are eligible. Eligibility for credit unions usually falls under the categories of where one works, lives, worships, or attends school.

2. A bank is owned by stockholders so profits go to them; a credit union is a non-profit organization which means it is owned by the members and run by a board of directors (who are unpaid volunteers). Furthermore, as is the case with all non-profit organizations, "profits" go back to the member or are reinvested into the credit union.

Q: What is the real benefit of joining a credit union? I mean isn't it just about the same as a bank anyway?

The biggest reason for joining a credit union (as opposed to a bank) would be for better member services and better interest rates. Banks see their accountholders as "customers" while credit unions see them as "members." The words may be synonymous in most conversation, but the fact is that credit unions strive to treat their accountholders with better service than a bank would. And for good reason: a credit union member (the accountholder) has far greater power and control than a bank customer does. Each year credit unions hold an annual meeting in which changes for the credit union are voted on. The credit union members get to vote based on a one-member, one-vote structure. A bank, on the other hand, is a for-profit, public company whose stockholders vote according to the number of shares of stock they own.

Furthermore, credit unions tend to charge lower fees on accounts and offer better interest rates than banks do because of the checks and balances system created by the board of directors.

Q: How do I know which credit unions I am eligible for?

A: One excellent site is http://www.howtojoinacu.org/quicksearch.cfm. That site allows you to search the US for credit unions you might be eligible for. Each search gives you a list of available credit unions. If you happen to live in a state who does not show up on the drop down menu, visit this site to search for a credit union.

I strongly suggest you either visit each credit union's website or contact them to see if you truly are eligible. For example, I did a search for Portland, OR and several of the matches were for credit unions that required I live in, work in, or worship in particular areas of Portland (not just anywhere in the city of Portland).

Also, you can click on this link to see a list of each state's Credit Union League

Check 21 FAQ
Mood:  hungry
Topic: FAQs
Check 21 FAQ

Q: What exactly is Check 21?

A: Check 21 is a federal law that was passed on October 28, 2004 which is designed to speed up the check clearing process for financial institutions. Although the law was passed in 2004, banks are not, at this time, required to process all checks according to the Check 21 law. The law simply gives them the opportunity to clear checks quickly; it does not require it at this time.

Q: But what exactly does that mean to me as a check-writer?

A: What this means is that anyone who writes a check should have funds in their account prior to writing that check. Since nobody knows exactly which institutions currently use Check 21, you never know if a check that you write that usually took a week to clear could clear within a few hrs or a few days.

In the past many people would do what is called "floating checks." Floating checks is when someone would write a check knowing that they didn't have funds in their account currently, but by the time the check travels halfway around the country to clear and process through their account, the funds would be available. Some people get away with this; I am a witness to tell you that many people do not. What most people don't realize, however, is that floating checks is illegal. So, please, don't cry to your institution that they are being unfair by charging you a fee to clear your checks before your deposit arrives.

Furthermore, some have taken advantage of the float by "check kiting." Kiting checks is done by writing several checks on several different banking accounts and depositing some of those checks to cover other checks you had written from each different bank account. As you can imagine, check kiting gets very complicated and more often than not, those who kite are unable to keep up. This too is illegal, of course. One reason Check 21 was passed was to attempt to stop check floating and kiting.

Q: Since checks could clear sooner through my account, does that mean financial institutions won't hold my check deposits as long?

No. Although Check 21 may eventually cause financial institutions to loosen the grip on their check hold policies, the Check 21 law itself does nothing to change check holds. Generally, banks can hold local checks for up to two business days, out-of-town checks for up to five business days, and other types of checks (e.g., checks over $5,000, checks drawn on new accounts, checks written against consistently overdrawn accounts, etc.) for up to thirty business days. You must keep this in mind when depositing checks. You want to make sure that funds are not only deposited into your account, but also that they are fully available before you write checks.

For more information on Check 21, please visit:
Frequently Asked Questions about Check 21

Debit and Credit card FAQ (Frequently Asked Questions):
Topic: FAQs
Debit and Credit card FAQ:

Q: What is the difference between a debit and credit card?

A: In a nutshell, a debit card accesses an account where funds are saved (usually either savings or checking) whereas a credit card accesses an loan account which needs to be paid off eventually. This means, if you have the money already to spend, you can use the debit card. If you do not have the money as of yet (but hopefully will soon) then you have to use a credit card.

Both cards require an "approval" of sorts from a financial institution. The credit card has more strict guidelines (since the lender has to assume you will have the money to pay it off eventually) than a debit card. But even debit cards are not given out to just anyone.

So you might ask yourself at this point, "if a debit card requires funds to be in the account to use it, why would someone need to be approved for one?" Well, the quick answer would be that a debit card requires approval much like a checking account requires one: a financial institution must protect itself from the costs associated with customers misusing or abusing accounts. The much longer answer involves a discussion about floating checks, check kiting, debit card fraud, and the like. So, just like a financial institution wants to protect itself from those who might misuse credit cards, they also want to protect themselves from those who would misuse debit cards.

Q: What is the physical difference between a debit card and a credit card? In other words, how do I know just from looking at my card whether it is a debit or credit card?

A: Usually a debit card will have "debit card" or "check card" listed somewhere on it (usually the upper right corner), but sometimes there is no visual difference between the two cards. Another good trick is to look at the back of the card. Although this by no means guarantees what sort of card it is, credit cards often times have fewer logos/icons on the back of the card than debit cards do. The best bet, of course, is to either contact the institution that the card belongs to. You may worry that this might be "too dumb" of a question to ask, but trust me, I know from experience that there are far worse questions asked of us in the financial fields. Not to mention, contacting them is another good way to get all your questions answered. At the very least, pay attention when you receive statements in the mail. If the statement lists an amount due and a due date, it is definitely a credit card; if it just lists beginning and ending balances with transactions listed between, it's a debit card.

Q: I used my debit/credit card at a store and was declined. I know that I had enough in my account/credit limit available to authorize the charge, so why was it declined?

A: The only surefire way to know exactly why the card was declined is to contact the institution that holds that card every time you are declined. Furthermore, make sure that if you want to know why the card was declined you contact them within a day or two of the decline since they may have limits as to how far back they can research a reason for decline. I have dealt with numerous people who ask why their card was declined, only to find out it was declined over a week ago. I then inform them that I can no longer see the reason for denial.

I can tell you that 9 times out of 10, the reason for a decline is either the expiration date is mismatched or the address the merchant enters doesn't match what the address that the institution has for the mutual customer.

Another common reason for a decline would be that an attempt never actually shows as being made on the card. This happens when either the merchant's systems are down, or the financial institution's systems are down. In either case, there is not a whole lot either one can do until the systems come back up. It would be much like getting mad at your friend for not calling you after you find out a tree knocked out his phone line. Not a whole lot either of you can do until the phone line is fixed.