A New Way To Beat Bank Fees - better rates and services offered to college students by college credit unions - Brief Article

Kiplinger's Personal Finance Magazine, August, 2001 by Ed Henry

BANKING | College CREDIT UNIONS may offer students a better deal on savings and loans.

STUDENTS HAVE long bemoaned the high fees and impersonal service that often go along with maintaining a small account at a college-town bank. To fight back, an increasing number are bypassing the banks and banding together as members of on-campus credit unions. There are more than 60 credit unions on college campuses nationwide--from the University of California to Penn State--flush with millions of dollars in assets. About a dozen of them are run by students themselves.

"We've gone after college students because banks are only interested in selling them high-interest-rate credit cards," says Bradford Caldwell, executive director of the Campus Credit Union Council (www.ccuc.org).

Like banks, the credit unions offer checking and savings accounts, and credit and ATM cards. But they may offer better deals. "Credit unions typically charge lower rates on loans and pay higher rates on deposits," says Greg McBride, a financial analyst for Bankrate.com, a leading research firm for consumer financing. For example, the interest rate on credit cards averages three percentage points lower than the rate on cards issued by banks, says McBride. The rate on unsecured loans, which a student might use to finance the purchase of a computer, averages one percentage point lower. Students will likely get a break on auto-loan rates, too.

Jeremy Garver-Hughes, who is a senior at Kent State University, is a big fan of his school's student-run campus credit union. "The culture is so anti-relationship at commercial banks," he says. "At the Kent State Credit Union, there's no charge for checking accounts, and loan rates are better than what I found at the campus bank."

For example, at Kent State the four-year loan rate to buy a new car is 8%; the used-car rate is 8.75%. At Bank One, the bank closest to Kent State, auto loans range up to 10% for new cars and 12.25% for used automobiles. On an $8,000, four-year used-car loan, the difference would save a credit-union borrower about $14 a month--a nice contribution to the beer-and-pizza fund. The rate on unsecured loans from the credit union also beats the bank's rate: Kent State charges 14.5%, compared with 16.4% at Bank One.

Credit unions encourage students to set up their accounts as soon as they establish a campus address, so their checks and ATM cards can be ready when they arrive on campus. You may be able to sign up early at the credit union's Web site and make a small deposit to open the account. At Kent State the minimum is $5. Parents planning to make regular contributions to their student's finances should look into setting up automatic transfer to the student's account, rather than mailing checks for the student to deposit. A credit union should be able to handle this transaction just as a bank would. You may check with your bank to arrange an electronic transfer, typically at no charge to you. --Reporter: ALISON STEVENSON

Borrowing Average rates for home and auto loans

These rates are national averages as of June 8, 2001, and assume a 20% down payment for mortgages. For daily up dates and to search for the best deals available to you, please visit our Web site at www.kiplinger.com.

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