My best friend had her bank account hacked last week. It was likely a skimmer that got her debit card number. They managed to drain her of over $1,000 before the bank caught it and shut down the card and the account.
On the surface this isn’t a huge deal. Her credit union is going to make it right and restore all of her funds. But in the short term it’s turned into a bit of a nightmare for her. There is a bit of a process involved in getting the funds back and getting a new bank account, new debit card, and new checks. In the meantime, there are bills to be paid. She can’t access cash through an ATM. She can’t write a check. And the money she had in her savings (thank goodness!) is having to cover her for the time being. If that little bit of savings weren’t there she would be in an even bigger mess.
I like to protect myself against situations like this by using a credit card rather than a debit card for everyday purchases. When a credit card is compromised (which has happened to me several times), they shut off the card, refund the fraudulent charges, and send a replacement card. Not a big deal. I just have to use a different card in the meantime. And I do have a backup card, so not a problem.
I asked my friend why she was using debit instead of credit, and she said she doesn’t trust herself not to charge up a credit card. She budgets best by using debit. And it’s great that she knows that about herself. But she left herself with very little protection for this situation. She doesn’t have a backup plan. She has her savings, but no easy way to make payments on bills that are coming due this week. She may have to lean on her friends to make payments for her by check or by card until she is able to get herself restored.
What would you do if you didn’t have access to your checking account and bills were coming due? Do you have a backup plan? A second checking account? (Yes…I have one of those, too). A credit card you can turn to in emergencies? It’s worth thinking about. Hacks and fraudulent charges happen. And banks protect you from them. But you should always be prepared just in case.
Last week, for the third year in a row, I got an email from my credit union telling me that they were going to deposit a portion of their profits into my account. When typical banks earn profits, they portion that money out to their shareholders in the form of dividends. In the case of a credit union, however, the shareholders are the people who have their accounts there. And my credit union, wanting to pay back the shareholders, has been sharing their profits for each of the last three years. And this is only one of the many reasons that I love my credit union.
I switched from a bank to a credit union several years ago when I was discouraged by the very low interest rates being paid on my savings. (This was before the bottom fell out of interest rates at the end of the last decade—now no one is earning much in interest on their savings!) But I’ve never regretted the decision to make the move. I’ve found that day to day banking life is just easier and better with my credit union than it was with my old bank. Online banking services are free. They never charge me to use an ATM, and they will reimburse me up to $20 per month in ATM fees charged by other banks. They made it easy for me to set up transfers to and from other banks. I can deposit checks with my smart phone or by mail. They make automatic transfers and online bill paying very easy.
Many people think that you need to have a bank that is local. I disagree. The closest branch of my credit union is 100 miles away, and it’s never been a problem for me. I set up my account initially by mail. I made deposits by mail for years until the smart phone technology came around. I get money by ATM (I prefer the fee-free machines at Sheetz). Most of my transactions are either electronic or by plastic. I’ve applied for loans with my credit union online and completed the paperwork by mail and fax. It’s very easy in today’s world to live without a bricks and mortar banking institution, so that should not be a deterrent for anyone.
The one catch with credit unions is that you must qualify for membership. It may be tied to where you work or go to school. You may have to have membership in a certain organization in order to qualify to join the credit union. You may have to live in a certain area. So you’ll have to do a little digging to find out if you are eligible to join (though all Penn State students are eligible to join the Penn State Federal Credit Union). But after the leg work is done, you’ll likely be happy with your banking experience. And you may even get some cash back!