• Key Differences Between Credit Unions and Banks

    Banks vs. Credit Unions pros and cons written on a blackboard.

    Managing your finances can be confusing. In fact, even knowing where to store your money can seem like a quandary, especially if you are new to banking. You may have heard people talking about how much they love their bank, or how much better it is to use a credit union, but is there really that much of a difference? The answer is yes, there are several differences between credit unions and banks, which we will explore here.

    First, let’s look at how they are the same. Banks and credit unions are similar institutions in that they provide checking accounts, savings accounts, certificates of deposit (CDs) and investment accounts, as well as mortgages, auto loans, and small business loans. Additionally, both banks and credit unions are insured by the United States government for up to $250,000 per deposit account. However, the way banks and credit unions are structured is very different, and so are the benefits they provide their customers.

    • Banks are for-profit, while credit unions are not-for-profit organizations. Banks invest the money you put into their care and the interest they take in from loans, and they use that money to grow the company, passing dividends to the owners. Credit unions, on the other hand, are structured differently. Because they are non-profit, the dividends they earn are passed along to their members. In addition, credit unions are member-owned, and members have the opportunity to vote on things like who should be elected to the board of directors.
    • Credit unions pay higher interest rates than banks. Because they’re member-owned, credit unions make higher interest rates on checking accounts, savings accounts, money market accounts and CDs a priority. In contrast, because banks are profit-driven and have a higher overhead, their bank accounts pay lower interest rates.
    • Often, the fees on credit union accounts are lower than those on bank accounts. For the same reason that they provide lower interest rates, banks often have higher fees. While banks often charge monthly fees and high overdraft charges, credit union fees are typically lower, with many offering free checking and savings accounts.
    • Loans through credit unions typically have better terms than loans from banks. If you’re a credit union member, you can typically get a lower loan rate on a car loan, mortgage loan, personal loan, or small-business loan than the customers of big banks. What’s more, credit union officers are often willing to work out loan options for people with low credit scores, while banks are likely to reject applicants who have low scores, because they calculate risk based on credit scores alone.

    Judging from the information so far, it may seem that credit unions are a no-brainer. In truth, banks have some advantages as well.

    • Banks offer better rewards programs than credit unions. Bank credit cards may offer rewards points or cashback, and opening a bank account will often score you a sign-up bonus. Credit unions don’t typically have these options.
    • Banks tend to have more locations than credit unions. Credit unions are often local or regional, while banks have physical locations across the United States. This makes it easier if you tend to move on a regular basis, and it’s more convenient for accessing funds in person or at ATMs.
    • Banks generally have better technology. This is because big banks have more resources, so they have better websites, mobile apps, advanced card technology, mobile check deposit, and mobile wallets. Credit unions are gaining on banks in this area, but for now, banks tend to have the advantage.
    • Banks are easier to join. Credit unions typically limit their membership, so that you can only join through your employer, place of worship, physical location, or membership in a specific organization. Banks, on the other hand, see you as a source of revenue and are eager to have you open an account.

    So with the benefits fairly evenly distributed, how do you choose between a bank and credit union? First, determine which options are most important to you. Then, look into specific banks and credit unions to see what they have to offer. Include online banking services in your research, and look for the organization that gives you the most of what you need. Still can’t decide? There’s nothing that says you can’t have more than one account, in more than one institution.

    Since 1941, GCS Credit Union has been serving customers in Illinois, providing loans, basic savings, and other banking services. Having started as a single location, we’ve spread throughout the area, and now support Sangamon, Logan, Macon, Marion, Jefferson, Perry, Jackson, Williamson, Jersey, Macoupin, Montgomery, Madison, Bond, Clinton, St. Clair, Monroe, Washington and Randolph counties. Dedicated to focusing on our members’ financial needs, we’re a not-for-profit, member-owned financial cooperative. If you’d like to know more about the benefits of a credit union, call (618) 797-7993, or contact us through our website.

  • How to Invest When You Have No Idea Where to Start

    investment savings

    Are you interested in investing? Whether you’re saving for retirement, college for your kids, a vacation home, or something else entirely, investing is a great way to create wealth. The only problem is that investing can be frightening if you don’t know what you’re doing. How do you gather your courage and take the plunge? Investing doesn’t have to be scary if you understand the basics and follow a few simple guidelines.

    Investing allows you to earn money passively because once you’ve set up your investment account you don’t really need to do anything to keep earning interest. What’s important for you to understand, however, is the different types of investment options that are available to you.

    • Stocks, or equity investments, are what you probably think of first when you think of investing. These are shares of publicly traded companies, and their value increases when the companies do well. Shareholders benefit when the company is earning profits, but are vulnerable when the market takes a downswing. Mutual funds and ETFs are grouped under stocks, but they’re actually pre-built pools of investments which can include bonds and securities.
    • Fixed-income investments, like bonds, have a prearranged, fixed interest rate. These investments pay at regular intervals or after a certain amount of time has elapsed. Government bonds, for instance, are loans you give the government, which it agrees to pay at maturity at a set interest rate. Because they’re not vulnerable to market shifts, bonds are typically considered
    • Money market or cash equivalent investments can be converted to cash very quickly. This category includes short term investments like certificates of deposit (CDs) and short-term debt securities like U.S. Treasury bills. There’s not much growth with this kind of asset, but there’s also not much risk.
    • Property, including real estate and other tangible assets, can grow in value over time. Some property, like cars, trucks, and SUVs, depreciates quickly, which means it loses value. Real estate, however, is fairly low-risk.

    For our purposes, let’s primarily focus on the stock market. While it’s true that stocks are vulnerable to market fluctuation, it’s also true that no investment is risk-free. Overall, the stock market is generally the most rewarding and accessible place for average investors to grow their money. As long as you don’t panic at every shift in the market, and understand that investing is about playing the long game, you’re likely to make money in the stock market.

    To get started, decide which type of investment account works for you. You might be investing for retirement, in which case a 401(k) or an IRA will allow you to make tax-deferred contributions while you build your retirement fund. Roth IRAs are a little bit different, in that they’re funded with money that’s already been taxed, so they’re tax-free when you retire. There are also investment accounts designed for a specific goal, like paying for health care costs or educational expenses. Then, too, you can open an individual investment account, which allows you to make withdrawals whenever you need to do so. Note: it’s smarter to keep your money in the account, without withdrawing any, for as long as possible.

    If your employer offers a 401(k), that’s a good place to start investing. Then you can consider creating an auxiliary investment fund, perhaps by investing in an IRA or opening a brokerage account. You can hire a full-service brokerage if you want, and let their investment advisers manage your money for you. However, it’s also possible to open a DIY brokerage account, for which you’ll do your own research and make your own trades. There are also investment apps that let you invest right from your cell phone, even if you have very little cash to invest.

    It’s important to diversify your investments, which makes mutual funds appealing. These funds invest in a set of assets make it easy to diversify your portfolio. They’re typically managed by a financial professional or firm and have traditionally required a rather substantial minimum investment. Today, however, there are some mutual fund companies that offer fairly low minimums for those just beginning to invest. Exchange-traded funds, or ETFs, are similar to mutual funds, but they’re not managed by a person. This makes them less expensive and easier to access directly, without an expensive minimum buy-in.

    The specific type of investment you choose is subjective, but there are a couple of important things to remember. First, keep putting money into your account, because regular contributions can help grow your investment more quickly. Your 401(k) will be automatically deducted from your paycheck, but if you have a brokerage account, it’s smart to set up automatic withdrawals. The other thing to remember is that the money needs to stay put once it’s in your investment account. Keep an eye on your portfolio, so you can keep track of what it’s doing and make adjustments when you need to, but for the most part, leave the money alone and let it grow.

    If you’re looking for a reliable place to keep your money, look no further than GCS Credit Union. Since 1941, GCS Credit Union has been serving customers in Illinois, providing loans, basic savings, and other banking services. Having started as a single location, we’ve spread throughout the area, and now support Sangamon, Logan, Macon, Marion, Jefferson, Perry, Jackson, Williamson, Jersey, Macoupin, Montgomery, Madison, Bond, Clinton, St. Clair, Monroe, Washington and Randolph counties. Dedicated to focusing on our members’ financial needs, we’re a not-for-profit, member-owned financial cooperative. If you’d like to know more about the benefits of a credit union, call (618) 797-7993, or contact us through our website.

     

  • Roth IRA Vs. 401K

    Roth IRA vs. 401K

    Do you have a retirement fund? You’re sure to need one, but if you have the option of choosing a Roth IRA or a 401(k), which do you choose? It’s easy for people to advise you to do both, but unless you’re already fairly well off, that may be a daunting proposition. If you have to choose one or the other, how do you decide between the two?

    • A Roth IRA is an individual retirement account. An individual can open the account and decide how investments are allocated. Roth IRAs differ from traditional IRAs and most 401(k)s in that they are funded with money that’s already been taxed. Therefore, once you reach the right time to withdraw it, the money is tax-free. Another benefit of Roth IRAs is that you can withdraw the contributions you’ve made at any time, though you will have to wait to access your earnings. Of course, it’s better to leave your retirement account alone, but it’s good to know that you have that money in case of a dire emergency.
    • 401 (k)s are retirement accounts sponsored by an employer. This means that, unlike with Roth IRAs, you can’t open a 401 (k) on your own. They also differ from a Roth IRA in that a 401(k) is tax-deferred. This means you can invest pre-tax income and not pay any taxes on that money until after you retire and withdraw your funds. Perhaps the most appealing thing about a 401(k) is that many employers match either part or all of your contribution, which essentially means your employer is giving you free money for your retirement account.

    Now that you have a basic understanding of each fund, are you any less confused about which one is right for you? Probably not, because it’s all still pretty confusing. Let’s break it down further, to see how they compare.

    • Your eligibility is a major factor. To open a Roth IRA you need taxable income, but to open a 401(k), you need to work for an employer that offers this kind of account.
    • Limits on how much you can contribute are different for Roth IRAs and 401(k)s. Both types of accounts have limits, but the limits are much higher for a 401(k).
    • Taxes vary depending on which type of account you choose. Remember, if you keep your Roth IRA account for at least five years and don’t withdraw it until you’re at least 59 ½ years old, your money will be tax-free. With a 401(k), you can expect to pay taxes when you withdraw the money.
    • Roth IRAs give you some flexibility with your investments. You can set up a Roth IRA through a brokerage firm or using software, at a physical location or online, and invest it however you wish. You can make your own decisions or consult with a financial advisor, or you can set up a robo-advisor to manage your investments for you. With a 401(k) there’s less flexibility. While you’ll be able to change how much you invest and your investment allocations at any time, your employer will limit your options as far as where the money is invested.
    • Withdrawing money from a retirement account can be complicated. You’re supposed to leave your money alone when it’s in a retirement account, but typically, you’re allowed to withdraw from both types of account without penalty if you face a hardship like a permanent disability or extremely high medical bills. However, as mentioned previously, you can withdraw the money you’ve contributed to a Roth IRA, and you can even withdraw your earnings early in some circumstances without penalty. On the other hand, early withdrawals from a 401(k) typically come with income taxes and an additional ten percent penalty.
    • Both 401(k) accounts and Roth IRAs have required minimum disbursements (RMDs). However, with a Roth IRA, you don’t necessarily have to take money out of your account. When you die, however, your beneficiaries will be subject to the RMD. With a 401(k), the IRA typically requires you to take disbursements at age 70 ½ unless you’re still working.

    So the question remains, which type of retirement account is right for you? If your employer offers a 401(k) and matches funds, then that may be your best bet, because it involves free money. Once you’ve maxed out what your employer will match, if you have excess retirement funds, you might want to put them in a Roth IRA. It’s good to know you’ll have money that won’t be taxed when you’re living on a retiree’s fixed income. If you don’t have access to a 401(k), it’s obviously in your best interest to have a Roth IRA. The important thing is to make sure you start putting aside retirement money early and put aside as much as possible.

    Since 1941, GCS Credit Union has been serving customers in Illinois, providing loans, basic savings, and other banking services. Having started as a single location, we’ve spread throughout the area, and now support Sangamon, Logan, Macon, Marion, Jefferson, Perry, Jackson, Williamson, Jersey, Macoupin, Montgomery, Madison, Bond, Clinton, St. Clair, Monroe, Washington and Randolph counties. Dedicated to focusing on our members’ financial needs, we’re a not-for-profit, member-owned financial cooperative. If you’d like to know more about the benefits of a credit union, call (618) 797-7993, or contact us through our website.

  • Budgeting For Back To School

     

    back to school budget Back-to-school season is upon us again, even though it seems like the summer barely got off the ground! Unfortunately, with the back-to-school season comes the dreaded back-to-school shopping, which most parents find stressful because it’s so expensive. According to the National Retail Federation, the average U.S. household will spend almost $700 on getting ready for the school year, and for parents of college kids that number is even higher: it’s a whopping $976.78. How do you get your kids back to school without breaking the bank? It takes a little bit of planning, but you can create a budget for back-to-school and maybe even save yourself some money.

    • First, determine what you need. Take the list provided by the school district or teacher, and then look around your house. You probably have a pretty healthy inventory of school supplies at home, so if you organize those, you may be able to reduce your shopping list. While you’re at it, review your child’s wardrobe and make note of additional clothing he or she will need to start the school year. It’s probably not necessary to buy a lot of new clothes, but it’s nice to have a “first-day” outfit, and there are some essentials that may need replacing. Consider less tangible back-to-school items as well, like a new haircut or a physical. Once you’ve compiled your list, estimate what each item on the list will cost, so that you can have a good idea of your projected expenditure.
    • Set your spending limit. It’s important to do your back-to-school shopping with a spending limit firmly in place, or impulse purchases may derail your budget. Be fiscally conservative, estimating the cost of items at their regular price and not the current sale prices, so that you’ll have a bit of leeway when you actually go to the store. If the projected expenditure exceeds your limit, take a hard look at the list and see if there’s anything that can wait until later.
    • Try to find some extra cash to pad the budget. You might be able to work a few extra hours, or find a temporary side job, just to give yourself some breathing room. On the other hand, if your children are preteens or teenagers, you might talk to them about contributing toward their own expenses. Especially if they want some trendy items that are a bit pricey, they should be expected to help pay for them. This is helpful for you, but it’s actually good for your kids as well, because it helps them learn about financial responsibility.
    • If you’ve got a few paychecks between now and the first day of school, divide the expenses between them. Set aside money from each paycheck, and it won’t feel like as much of an expense as it would if it all came out of one check. Look for different ways to set aside money, perhaps challenging yourself to set aside all of one denomination of cash, or round up your purchases and put the extra into your back-to-school fund. You might even put yourself on a discretionary spending freeze, in order to save up for your school shopping.
    • Shop wisely. Before you head out for school shopping, study several ads, and determine which store has the best deals. You might even consider hitting more than one shop, in order to cut down on your spending. Look for ways to save even more, by shopping consignment stores, taking advantage of your state’s tax holiday, using coupons, and buying generic. Allow your child a couple of splurge items, but save money wherever you can.

    Need to set up a savings account so that you have a place to safely stash your back-to-school cash? Look no further than GCS Credit Union. Since 1941, GCS Credit Union has been serving customers in Illinois, providing loans, basic savings, and other banking services. Having started as a single location, we’ve spread throughout the area, and now support Sangamon, Logan, Macon, Marion, Jefferson, Perry, Jackson, Williamson, Jersey, Macoupin, Montgomery, Madison, Bond, Clinton, St. Clair, Monroe, Washington and Randolph counties. Dedicated to focusing on our members’ financial needs, we’re a not-for-profit, member-owned financial cooperative. If you’d like to know more about the benefits of a credit union, call (618) 797-7993, or contact us through our website.