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One of my money resolutions is to switch banks. I’ve been a long-time customer of a big bank that, in recent years, has stood out among headlines that reveal sneaky and unethical business practices. That’s not the only reason I’m switching, but it does help me want to change. So, it has got me thinking bank vs. credit union?

Some people think credit unions aren’t terribly convenient — maybe they don’t have online banking, or maybe it’s hard to find an ATM when you’re traveling. But I’ve found that, despite the potential inconveniences, there are advantages to consider when it comes to a credit union. Here are a few things I’m keeping in mind as I make my decision.

Interest Rates

The main draw I’ve often heard about credit unions is they offer lower interest rates on loans and higher Datatrac analyzed the average interest rate differences between credit unions and banks. When it came to car loans, banks’ interest rates were about two percent higher. When it came to mortgages, rates were very similar.

Savings yields

The National Credit Union Administration also regularly analyzes the average rates of credit unions and banks. Their latest data (June 2013) found that the average “regular savings” rate for a credit union was 0.14 percent. The national average for banks was 0.13 percent.

But when it comes to choosing what works for you, you’re probably less interested in average and more interested in best. According to Datatrac, the “bank high” savings rate is 1.06 percent. The credit union high is 3.00 percent, which is awesome, but not necessarily accessible.

For example, I researched the credit unions in my community that I might be approved to join. On the high end, those credit unions offered an APY of 0.25 percent. My current bank offers 0.50 percent, and the bank I’m considering offers 0.85 percent. So while credit unions have the overall reputation of having higher interest rates, I guess it really depends on what’s available to you in your community. But with a credit union high of 3 percent APY, it’s definitely worth looking into.

If you’re getting a car loan, it’s probably best to go with a credit union. But I’m not a big fan of car loans in the first place (though I understand people have their reasons), nor do I think I’ll need one anytime soon. At this point in my life, I’m only concerned with interest rates when it comes to saving. On average, credit unions have better rates, but I’m not sure I have access to the high rates mentioned on these reports.

Related >> Why I plan on driving my car into the ground

Fees

Credit unions are known for having low to no fees on their accounts. And while they may offer free checking and even checking with interest, I’ve come across a couple of banks that offer the same thing. Many credit unions require no minimum to open; the bank I’m considering doesn’t require a minimum deposit either.

Related >> Checking Accounts

What’s more, according to a July 2013 article from the Washington Post, credit unions have been hiking up their overdraft fees faster than banks.

“The report shows that banks have held the median overdraft charge at $30 a transaction for the past four years, while credit unions have upped their price from $25 to $28 a transaction in the past two years.”

Related >> Getting Over the Overdraft: How I Started Saving

On the other hand, “fees are still lower on average at credit unions as of the first three months of 2013.” I’m not planning on using overdraft protection, so this doesn’t really affect me, but I thought it worth noting. An article from The Street also confirms the misunderstood stereotype that credit unions = no fees.

“Unfortunately, many who make the switch assume mistakenly that just because they’re banking with a credit union, they’re not going to be charged fees. The truth is that credit union members are just as vulnerable to fees as bank customers — a fact that is rarely shared or acknowledged.”

Most people with credit unions love them and attest that they don’t pay fees. And I’m not saying most banks don’t assess ridiculous fees, but it does seem like the whole “no fee” thing with credit unions might be a little overrated. I’m not knocking credit unions; I’m just saying, if I switch, I don’t think fees will play a huge part in my decision.

Business Model

Structure

Here’s where credit unions win, by far — the way they’re structured.

Credit unions have a reputation of being more personal and focused on community, and there’s a reason for that. When you open an account with a credit union, you become a shareholder. In fact, the operators of credit unions are members themselves. As Michele Lerner explained in a Get Rich Slowly question:

“First, unlike banks, credit unions are financial membership organizations. You don’t open an account at a credit union, you become a member and use your deposits to buy shares in the business.”

Credit unions are also community-focused because a lot of their members belong to a similar group. My old company, for example, had a credit union. My university had a credit union. In Los Angeles, there are a lot of entertainment-industry-related credit unions.

Theoretically, credit unions are private cooperatives that are owned and operated by their own members, the advantage being that local money stays within the community. Many people like the idea of that and, according to credit union members, it usually translates to a better “customer” experience.

Profit

While banks want to make money and appeal to investors, credit unions are not-for-profit, and their investors are their members. Any profit made from a credit union is supposedly returned to its members in the form of low interest rates or lower fees (although there’s been some recent controversy over the industry overusing these profits on advocacy efforts).

Overall, though, a non-profit structure usually translates to: a) not feeling like your financial institution is trying to take advantage of you, and; b) not seeing your financial institution’s name next to the words “crooked” and “discrimination.”

While they’re certainly not immune to questionable practices, the structure of a credit union seems to provide a better overall experience, and most credit union members attest to that.

Overall, I suppose it depends on what you’re looking for in a financial institution. Both options — credit union or bank — have their advantages and disadvantages. There’s also the long term to think about. You might feel that, in the long term, the structure of a credit union may serve you better. In the long term, rates may be significantly better. Either way, in making a decision, there are a handful of things to consider. Loans, rates, business model, fees and convenience are all factors that could affect one’s decision.

I’m still deciding, so I’d like to read your thoughts. Do you use a credit union or a bank, and what are some benefits and drawbacks of each?

Source: getrichslowly.org

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Man, this card looks amazing! 4x cash back, $100 in annual hotel credit, and…

Oh, wait – there’s a $95 annual fee. 

Bummer. 

Well, hang on – maybe it’s still worth it? How can you tell? Will the perks and benefits justify the fee? Or is a no-fee card always the way to go?

To find out, let’s investigate paid rewards cards – why some cost $95 and others cost $695 (yeah…I know) – what you get for your money, and how much you really need to spend for a paid card to make sense. 

What’s Ahead:

What are annual fee credit cards? 

Is An Annual Fee Credit Card Ever Worth It? - What are annual fee credit cards? 

Source: fizkes/Shutterstock.com

As the name implies, annual fee credit cards are rewards cards that typically cost anywhere from $50 to $695 a year to use. 

Why do credit card issuers charge annual fees for some cards and not others? 

Credit card issuers typically charge an annual fee to help cover the costs of the perks included with the card. Despite the gobs of money these banks and card issuers make, even they can’t afford to offer every single cardholder free lounge access and $300 in travel credit each year. 

Annual fee credit cards usually include some combination of the following over no-fee cards:

  • Higher cash back.
  • Higher redemption bonuses (e.g. points are worth 1.5x when redeemed for travel).
  • Better welcome bonuses ($500 versus $200).
  • Statement credits (e.g. $300 annual hotel credit).
  • Perks and bonuses (VIP lounge access, 24/7 travel concierge, etc.).

Why are some fees so low ($35-$95) while others are insanely high ($695)? 

A $500 card will typically include more statement credits than a $100 card. 

Let’s look at two, seemingly identical travel cards: 

  • The Chase Sapphire Preferred® Card costs $95 a year, offers 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That’s $750 when you redeem through Chase Ultimate Rewards®., up to 5x points back on travel-related expenses, and more.
  • The Chase Sapphire Reserve® Card costs an eye-watering $550 per year, offers a 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That’s $900 toward travel when you redeem through Chase Ultimate Rewards®., and up to 10x points back on travel-related expenses, and more.

Sure, the fancy-schmancy Chase Sapphire Reserve® Card has more cash back (10x) and a higher redemption bonus within Chase Ultimate Rewards® (1.5x vs. 1.25x) than its sibling, but neither of those justifies a $455 price difference.

That is, until you consider the former’s annual cash bonuses. The Chase Sapphire Reserve® Card includes the following credits:

  • $300 Annual Travel Credit.
  • $100 Global Entry or TSA PreCheck® Fee Credit (every four years).
  • Complimentary enrollment in Priority Pass™ Select (aka VIP airport lounge access).

So even though the Chase Sapphire Reserve® Card costs more than a new mountain bike, it starts to make a little more sense if you plan to use all of the included credits. $550 – $300 – $100 = $150, which is just $55 more than the Chase Sapphire Preferred® Card. 

In short, most cards with fees over $100 should come with ample bonus credits to offset the fees. 

Can you ever get an annual fee waived? 

It may surprise you to hear that yes, even credit card annual fees are negotiable. You may not always negotiate successfully, but you can always try. 

Here are some tips for getting your card’s annual fee waived. 

Negotiate with your existing card company

If you already have a no-fee card and are considering upgrading to one of your card issuer’s paid annual cards, ring them up and just ask nicely. They may be willing to waive your annual fee for the first year.

Ask them to price-match with another card

Let’s say the annual fee credit card you really want costs $295 for the year, and you notice that it offers similar benefits to a competing no-fee or low-fee card. Call the card issuer and ask if they’d be willing to price match with the lower fee card – or better yet, waive the fee entirely. 

Chat with the retention department

If you already have an annual fee credit card and are trying to get your fee waived or reduced, and the agent on the phone isn’t playing ball, you can always ask to just cancel the card. 

At that point, one of two things will happen:

  1. You’ll be routed to the retention department, which is much more likely to bend to your requests.
  2. The agent on the phone will proceed to cancel your card.

If you don’t want to cancel your card, you may then have to suffer a moment of awkwardness when you tell the agent “actually, NVM” – so keep that in mind if you don’t like having your bluffs called!

When is it maybe worth paying a credit card annual fee? 

Is An Annual Fee Credit Card Ever Worth It? - When is it maybe worth paying a credit card annual fee? 

Source: Victor Josan/Shutterstock.com

You’ll earn more cash back than with a no-fee card – accounting for your annual fee

Let’s say you’re considering a card that charges a $95 annual fee but offers 3x cash back. 

Your first inclination may be to calculate how much you need to spend to offset your fee with cash back. So that’s:

$95 / 0.03 = $3,167

You easily spend that much in a year, so it seems like a good deal.

But hang on – remember, you’re not just trying to offset your fee – you’re trying to earn more than you would with a no-fee card. 

By the time you’ve spent $3,167 with a no-fee card with 1.5x cash back, you’ve already earned:

$3,167 x 0.015 = $47.50

Not until you spend twice that – $6,333 – does the annual fee credit card “catch up” to the no-fee card and start earning you more. 

In short, keep in mind that once your cash back covers your fee, you still have a lot more spending ahead of you to catch up to a garden variety 1.5x card. 

The card offers a steep welcome bonus to cover its fees

Thankfully, many annual fee credit cards have big, juicy welcome bonuses to cover their annual fees – oftentimes for several years over. 

Take, for example, the American Express® Gold Card. Sure, it charges a $250 credit card fee – but it also has a welcome bonus of 60,000 Membership Rewards® Points worth between 0.6 and 2 cents a pop when applied to travel through certain partners. 

You’ll get a statement credit for things you’re already paying for

The first time I saw the credit card fee for The Platinum Card® by Amex, I could hardly believe it. $695 a year? Who’s falling for this? 

But then, the little Amex fairy told me to keep reading, and amazingly, The Platinum Card® started to make sense. 

In addition to up to a 100k welcome bonus and up to 10x Membership Rewards® Points on select purchases, The Platinum Card® offers:

  • $200 Hotel Credit.
  • $200 Airline Fee Credit.
  • $200 Uber Cash.
  • $240 Digital Entertainment Credit.
  • $100 Global Entry or $85 TSA PreCheck®.
  • And more.

Before talking points and perks, the statement credits alone account for $940 worth of bonus cash back. 

If you’re already spending $940 within those areas, then The Platinum Card®’s $695 annual fee doesn’t just make sense – it’s a discount. 

The card has perks and bonuses that make your life easier

In most cases, a credit card’s perks alone probably aren’t worth paying an annual fee – but if you’re seeking a tiebreaker between a fee card and a no-fee card, they may just tip the scales. 

Annual fee credit card perks often include:

  • Travel insurance.
  • Lounge access.
  • 24/7 travel concierge assistance.
  • And more.

For example, among other things, the Delta SkyMiles Gold American Express Card always gives you Main Cabin 1 Priority Boarding, so you can stash your stuff and just relax sooner on every flight. That perk alone may not be worth $250 a year, but anything that lowers your stress is worth something!

When is it not worth paying a credit card annual fee? 

You won’t earn enough cash back to cover the fee

Remember, most no-fee cards these days offer 1.5x cash back. The Citi® Double Cash Card actually offers 2x cash back (plus a host of other benefits). 

For that reason, it’s becoming harder for annual fee credit cards to compete with their pro bono brethren. The annual fee card likely won’t justify itself on cash back rewards points alone, unless you spend a lot. 

You’ll need to also consider the perks and bonuses attached. 

The perks and bonuses aren’t worth the annual fee

The Luxury Card™ Mastercard® Black Card™ is a textbook example of a paid card that just isn’t worth anywhere near its annual fee. Its chief bonus – a $100 airline credit – doesn’t come close to covering the outrageous $495 sticker price. 

Keep in mind, too, that the perks, bonuses, and statement credit provided by an annual fee rewards card are only worth cash if you use them. I myself have forgotten to use my statement credit in the past, which is just leaving money on the table.

Your credit score isn’t high enough

This one’s simple – if your credit score is below 690, you may not even qualify for an annual fee rewards card in the first place. 

But wait a second – if you’re trying to pay for a credit card, why would the credit card company stop you from giving them money? 

Annual fee rewards cards are designed to attract big spenders – specifically, big spenders who have a track record of paying their bills on time. That’s why credit card companies require a higher credit score for paid cards – around 690, compared to 660 for a regular, no-fee rewards card (though numbers vary by card issuer). 

If you’d like to learn more about your credit score, check out How Credit Works: Understand The Credit History Reporting System. And if you’re trying to bump your numbers so you can successfully apply for a fancy paid card, we can help you there, too – check out How To Improve Your Credit Score, Step By Step. 

You need 0% APR on purchases or balance transfers

You should know that annual fee rewards cards rarely, if ever, offer 0% APR incentives. 

Again, that’s because these cards are designed to attract big spenders – not big savers or debt consolidators. In fact, most annual fee credit cards hammer you with the industry’s maximum APR right out the gate – usually around 29.99% – meaning there’s zero forgiveness for missing a payment. 

If you think you might need some help with old debt, new debt, or simply may miss a payment in the next year or so, you should absolutely stay away from a paid rewards card. Instead, consider our list of the Best 0% APR Credit Cards and Best Balance Transfer Cards. 

The card fits the lifestyle you want – not the one you have

Don’t make the same goober mistake I did!

From 2013 to 2015 I had a certain travel rewards card for work that commanded a $95 annual fee. And boy, was it worth it – my company required us to put all travel and dining charges on our own card (to be reimbursed later), so I was racking up the points. 

Then, when I left my job in 2015… I decided to keep my card a little longer, assuming I’d keep traveling. 

Instead, I settled in, wrote my book, and forgot to cancel my card. Basically, $95 down the drain.

Once I realized my mistake, I learned a valuable lesson in money management: 

Pick the credit card that fits the lifestyle you have – not the one you think you’ll have.

Questions to ask yourself before paying a credit card’s annual fee

Source: alexialex/Shutterstock.com

To consolidate the two previous sections, here’s a “gut check” questionnaire to see if a paid card is right for you:

  • Is my credit score high enough to apply for this card? Or do I need to bump my numbers?
  • Do I need 0% APR on purchases or a balance transfer? If so, a paid card typically doesn’t offer these and isn’t a fit – I should check out the top-ranked 0% APR cards for new purchases or balance transfers instead.
  • Why am I considering this card? Does it fit my existing spending habits? Or will it encourage me to spend more when I should be saving?
  • Will the welcome bonus offset its annual fee? Are the points worth a penny each, or less? And will I spend enough to trigger the welcome bonus in time (e.g. $4,000 in 3 months)?
  • Is it really better than a no-fee card? Now that no-fee cards offer up to 2% cash back on all purchases, is this paid card really worth it?
  • What is the combined statement credit worth? And will I even use it?
  • Will I really use this card for longer than a year? Or should I set a calendar note in 11 months to cancel it before paying the fee again?

When in doubt, stick with a no-fee rewards card. Like Mazdas and Toyotas, they truly are catching up to their “luxury” counterparts in terms of value and benefits for way less money. 

For a list of the top-ranked no-fee rewards cards, check out Best No Annual Fee Credit Cards – Don’t Pay A Dime To Get Another Credit Card. 

Tips for getting the most out of your no-fee card

They say that before you spend $35,000 on a shiny new car, you should spend $35 washing and waxing your old car first. Oftentimes, a good spit-shine is all you need to appreciate the car you already have. 

Similarly, if you’re considering upgrading from a no-fee card to a paid card, try spending a little time with your no-fee card first. 

  • Maximize your cash back rewards – Does your card offer rotating 5x cash back rewards categories like the Chase Freedom Flex℠? If so, be sure to both activate and maximize those rewards.
  • See what hidden perks your card has – Even no-fee cards offer a surprising amount of perks these days. Capital One VentureOne Rewards, for example, offers a free Auto Rental Collision Damage Waiver, free Travel Accident Insurance, automatic Extended Warranty Protection, and even lounge access – all for $0.
  • Consider another no-fee card first – If you still feel that your no-fee card isn’t meeting all of your needs or maximizing your cash back, consider another no-fee card before you invest in a paid card. As illustrated above, the Capital One VentureOne Rewards Credit Card is an excellent travel card with no fee that you can use specifically for booking flights and hotels without worrying about covering your annual fee.

Summary

So, should you pay for a rewards credit card?

Probably not. No-fee cards are just so generous with cash back and perks these days that most paid cards just aren’t worth it unless you’re spending gobs of money. 

But if that’s you, do the math – calculate how much you’ll spend on a no-fee card and its equivalent paid card, and determine how much money you’ll save and cash back you’ll earn. If a paid card truly pays you back in spades, it might be worth it. 

But for most of us, a no-fee rewards card will make us plenty happy.

For Capital One products listed on this page, some of the above benefits are provided by Visa® or Mastercard® and may vary by product. See the respective Guide to Benefits for details, as terms and exclusions apply.

Read more:

Source: moneyunder30.com

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How Bankrate scored Third Federal Savings and Loan

To determine Third Federal Savings and Loan’s Bankrate Score, Bankrate’s editorial team rated it and other lenders on a scale of one to five stars based on a variety of factors relating to the lender’s products and services. (Bankrate’s partners compensate us, but our opinions are our own, and partner relationships do not influence our reviews.) We derived its overall score by considering three basic factors:

  • Affordability: Third Federal’s mortgage rates are largely below Bankrate’s averages, and you can save on upfront closing costs with the bank’s low-cost options.
  • Availability: The bank serves borrowers in 25 states and Washington, D.C., and doesn’t offer government loans.
  • Borrower experience: Third Federal has a broad range of customer service hours and lots of online resources to help guide you through the mortgage process.

Affordability: 5/5

Affordability differs from lender to lender, so comparing costs is key. Third Federal Savings and Loan clearly displays mortgage rates on its website. These rates are generally competitive and updated regularly, and you can set up automatic rate alerts to get a notification when rates drop below a certain level. If you input some details about your desired loan, you can get even more information, such as the estimated payment and closing costs or how much you could save on the interest rate by paying for points.

The bank charges common closing costs that can include an origination fee, but also offers a lower-upfront cost option for virtually every type of loan that keeps these costs to just $295. These low-cost loans have a higher interest rate, however, so you’ll have a higher monthly payment and your borrowing costs could amount to much more over the life of your loan. Additionally, while there’s no fee to get a preapproval, you might be charged an application fee depending on the type of mortgage you’re seeking. Notably, the bank also offers a $750 closing cost credit to first-time homebuyers.

Availability: 4/5

This factor can make the overall mortgage application process smoother or more challenging. Third Federal Savings and Loan works with borrowers in 25 states, so you’ll need to confirm whether it services yours before you apply for a mortgage with the bank. Its loan offerings include conventional loans as well as construction loans and financing for investment properties. The bank doesn’t offer government-insured mortgages, however.

Borrower experience: 4.7/5

Know what to expect when you work with a specific lender. Third Federal Savings and Loan has 80 years of experience lending to borrowers in Ohio and elsewhere in the U.S. The bank has an A- rating from the Better Business Bureau. Its website makes it easy to check available rates, get preapproved, apply for a loan and sign the required paperwork. Before you apply, you can use the bank’s useful calculators to determine how much home you can afford and to estimate your monthly payment. Once you get your loan online, you can use the Third Federal app to manage it; however, you can’t apply for the loan itself directly through the app.

How to apply for a mortgage with Third Federal Savings and Loan

You can apply for a purchase loan or a refinance in person at one of the bank’s branches, on Third Federal’s website or by calling 1-800-THIRD-FED.

Here are some tips to prepare for the process:

  1. Check your credit report. It’s important to check your credit report before your lender does, in case there are errors that could impact not only whether you get preapproved but also your ability to get the best mortgage rate. Knowing your credit score also helps you decide what type of loan to apply for. If your score is in the very low 600s, for instance, an FHA mortgage might be best for you, as its standards are more lenient than those for conventional loans.
  2. Gather personal and financial documents. With any lender, you must supply documentation about your income, assets and debts. This includes pay stubs and W-2s and account and loan statements.
  3. Provide details about the property. You’ll need to provide the address of the home and submit to an appraisal. (If you’re refinancing, you might or might not need an appraisal.)

Refinancing with Third Federal Savings and Loan

Third Federal Savings and Loan offers refinancing at competitive rates in line with Bankrate’s averages. You can apply to refinance your loan through the bank’s website, either to take equity out of your home, refinance your existing balance to a lower rate or shorter term (or both) or consolidate debt. The bank’s low-cost loans ($295 closing costs) are also available for refinances.

Methodology

Bankrate’s expert editorial team collects lender information through a variety of methods. We contact lenders directly, and we also turn to regulatory filings and to assessments by third parties. Our research takes into account three main factors – affordability, availability and borrower experience.

Bankrate’s reporters and editors have decades of experience covering the mortgage industry. They’re skilled at gathering information through interviews and by scouring regulatory filings. Bankrate evaluates more than 85 lenders for factors relating to affordability, availability and customer experience, assigning each a Bankrate Score out of five stars. Here’s how we assess each of the categories:

  • Affordability. Loan cost is a deciding factor for many borrowers. We look at two metrics: 1) a lender’s lowest advertised annual percentage rate (APR) based on Bankrate’s sample scenario, which assumes a 740 or higher credit score and a 20 percent down payment, among other factors and 2) established-customer discounts or incentive pricing, when applicable.
  • Availability. Another factor is how quickly your loan application will be approved, and how many loan programs the lender offers. So we evaluate approval and closing timelines and diversity of loan products.
  • Customer experience. Finally, we delve into what it’s like to deal with the lender as a consumer. We look at the lender’s application process and availability of customer service support. We also consider the results of J.D. Power’s 2022 Mortgage Origination Satisfaction Survey.

Bankrate’s editorial team confirms the accuracy of data at the time of publication. Our team is dedicated to maintaining the timeliness of information – the mortgage industry is changing constantly, so we regularly revisit these reviews to update them.

Bankrate’s methodology page spells out our rating process in greater detail.

Source: thesimpledollar.com