Tough Times Series: When Times Are Tough We Can Help

Michelle M. Haas-Dosher



You've seen the headlines about the struggling economy: job losses, foreclosures, negative savings rate, recession.

In tough times, it's more important than ever to develop and maintain good financial habits. "Having a household budget and shedding high-rate credit card debt are two obvious things that could benefit most consumers," says Mike Schenk, vice president of the Credit Union National Association's (CUNA) economics and statistics department, in Madison, Wis.

"But figuring out where to start can be a daunting task—especially if you feel like you're already in trouble. The thing to remember is that it's never too late to ask for help—a trip to your credit union should be 'Job No. 1.' "

Manage your mortgage

If you have an adjustable rate mortgage (ARM) and are facing a rate adjustment, refinancing your home loan with your credit union might be the break you need. If you qualify, you could:
  • Refinance into a fixed-rate 30-year (or shorter-term) mortgage.
  • Refinance into a new ARM that has terms better suited to your situation.

Even if you have a fixed-rate home loan, refinancing may free up some money you could use to:

  • Pay down more expensive debt—credit card bills, for example.
  • Build your emergency fund for unexpected expenses, such as car repairs or a new furnace.

Tap your home's equity

A home equity line of credit can be a useful cushion if you're not already overloaded with debt.
  • You can set it up and never draw on it, but have the comfort of knowing it's there if needed.
  • If you're already tapped out, borrowing more is not the answer.

Cut credit card costs

Not all credit cards are created equal. Switch to a credit union credit card—they average more than two percentage points lower than bank credit card interest rates, and often have lower fees as well.
The people at your credit union can provide balanced, practical personal finance information.
  • Pay on time, no exceptions
  • Whenever possible, pay the balance each month. When you have to stretch payments, pay in as few months as you can manage.
  • Avoid cash advances—the interest rate on these is higher than on straight purchases.

Pass up payday loans

Payday lenders promise to help when you're short on cash. You'll get the money you need, but with interest rates from 300% to 1,000%.
  • Check the Consumer Federation of America's (CFA) Web site to see what it really costs to borrow from a payday lender, and
  • Visit your credit union—Credit unions offer payday loan alternatives with fairer terms and lower interest rates, such as short-term signature loans and low cost cash advances.

Use direct deposit

NACHA, the electronic payments association, Herndon, Va., surveyed 1,505 consumers. The survey revealed that those using direct deposit save $390 a month, $90 more than those saving manually—due to consistent rather than random savings. Direct deposit gives you:
  • One less thing to worry about; it's the safest way to receive your money,
  • An easier and more convenient way to contribute to IRAs (individual retirement accounts) and other savings vehicles, and
  • More control over your money and your time—it's predictable and dependable.

Steer clear of scams

Some scammers use negative economic news to scare investors into high-risk investments. They use investor fears to promote sketchy schemes with promises of high return and no risk that leave investors with nothing but empty wallets.
Don't wait until you're in deep trouble to ask for a financial checkup.
  • Hang up on aggressive cold callers
  • Delete unsolicited e-mails promoting investment opportunities.

"As member-owned not-for-profit institutions, operating with a people-helping-people philosophy, credit unions really look out for their members' best interests. Most credit unions are happy to provide personal financial advice, and consumers who use credit unions know that their consumer-friendly pricing can result in savings of hundreds of dollars annually," says CUNA's Schenk.

Don't wait until you're in deep trouble to ask for a financial checkup at your credit union. In fact, the earlier you ask for a review, the better the outcome can be.

Up to your eyeballs in debt

If you're maxed out and don't know where to turn, don't be won over by credit repair service ads you might see on late-night TV. You have much better avenues:

  • Your credit union—Ask if someone there provides one-on-one credit counseling to help get your finances in order.
  • The National Foundation for Credit Counseling (NFCC)—The NFCC in Silver Spring, Md., has nonprofit Consumer Credit Counseling Service (CCCS) affiliates around the country ready to help you get back on track from financial difficulty. To locate the nearest CCCS office, call 800-388-2227 or visit nfcc.org.

Related Home & Family Finance Resource Center items

Published May 12, 2008

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