Should I Move My Money to a Credit Union?
Should I move my money from a big bank to a credit union or to a smaller local bank? The reasons for wanting to move your money are sound but you should be wary of moving your money to a credit union.
Reasons not to move your money to a credit union:
- Cross-colleteralization
- Ability to grab your deposit to pay your debt
- If you are not a good member they will terminate your membership
Cross-collateralization
Simply put, it is a method a credit union uses to secure all loans or credit cards by any collateral (goods) you own. The loan has multiple forms of security and each of your loans is secured by multiple assets. Most credit union loans are secured by all of your accounts. They are secured by your share accounts and your checking accounts. If you borrow money for a car loan, it is also secured by credit union accounts. If you also have a credit card with the credit union it is secured by your car loan. Miss a credit card payment and your credit union can and will repossess your car and seize the money in your checking and savings account..
Read your credit union paperwork carefully.
Emptying your credit union account
Miss a payment on any loan and the credit union can and will take ALL of your money in any accounts you have with them, not just the missed payment.
Terminate your membership
If you bounce a check, miss a payment, or file a bankruptcy the credit union will just close your accounts and kick you out.
While you will often hear that credit unions are much friendlier and will lend you money even when you have fallen on hard times, they do so because they have several ways of ensuring they get paid, whether you can afford to pay them or not. As with any documents you may be required to sign, you need to pay even closer attention to those you sign with a credit union.