Wednesday, November 27, 2013

When is 0% for a car loan not really zero??

Good Morning! Today’s blog is guest written by our Personal Auto Shopping Service Manager, Bill Fultz. Bill had over 20 years in the auto sales business before he came to work at our credit union. Here, Bill gives us an education on how a zero percent auto financing deal may not actually equal zero percent for the consumer and could cost them more than conventional financing.

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This time of year, we make our members a lot of auto loans. One of the phrases we often hear is, “I can get Zero Percent financing at the dealership.” But, is Zero Percent financing really 0%? Do you save more money taking the car with the dealer’s 0% financing or would you be better off negotiating the price of the car including the rebate and taking out a loan from your local credit union?

Here is the dealer’s basic program: 0% financing for up to 60 months or you have the option of taking a rebate from $1,000 to $2,000 and find your own financing. Which one is the better deal for you? Let’s look at this 0% deal and compare it to a low interest Meriwest Credit Union 60 month loan with the manufacturer’s rebate applied.

Dealer loan:

$20,000 @ 60 months 0% interest = 60 payments of $333.33

Meriwest Credit Union loan after $2000 rebate is applied:

$20,000 minus $2,000 rebate = $18,000

$18,000 @ 1.99% * = 60 payments of $315.20 total interest paid: $925.20

$18,000 + $925.20 = $18,925.20

You save $1,074.80 ($20,000 - $18,925.20) with a Meriwest Credit Union loan

(This is an example. Your actual savings will depend on the size of the rebate on the Vehicle you purchase and the actual rate you qualify for at the Credit Union).

Besides the outright savings using your Credit Union loan, you also get that savings up front!  That means that even if you decide to sell or trade in your vehicle before the 60-month loan is paid, you already have saved the money when you purchased. 

If you decide the 60-month 0% is the better way to buy, also consider that in order to actually save the full amount you must keep the car the entire 60 months.  If you sell or trade before that time period, you have lost the value of the rate.  Statistically most 60 month loans are paid off by members in a period of 36 months, as members choose to sell or trade in their vehicles on a newer model and in some cases as a result due to an accident.  

Members who take the up front cash rebates are free to do as they please with regards to trade-in etc, since they are not forced to keep the vehicle for the full term of the loan in order to realize the advantage of low or 0 % financing.  So, if you are in the market for a new vehicle from a manufacturer offering large rebates or artificially low interest rates, contact a Meriwest Credit Union financial service representative to give you a comparison between a Meriwest loan and the Dealer’s.  You might find out that 0% isn’t really as good as it sounds!

About P.A.S.S.: Whether you're looking for a new or used auto, using P.A.S.S. means you don't have to deal with dealership salespeople. Instead, you work directly with Bill Fultz, Meriwest's Personal Auto Shopper and your very own insider in the automotive world. He has access to thousands of new and used cars in dealer inventories all over the state. Need a new or used car? Check our link at for more info.

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Our next Financial Education Workshop:

Credit Myths and Credit Repair
December 11, 2013 - 6:30pm
Meriwest Credit Union Main Office
Training Room
5615 Chesbro Ave
San Jose CA 95123

Please RSVP to

Friday, November 15, 2013

College Students Using a Credit Card

The best way to use a credit card is only for emergencies. A blown transmission is a good example. Not everyone has $2,000 to fix it when it goes. But that transmission is an integral part of your car and your car is an integral part of your economic development; i.e. it gets you to class and to work on time. So fixing that transmission quickly and being able to pay it off over time may be very important for many students.

This brings me to my second point beyond emergencies, use your card to only purchase assets; not liabilities. The transmission is an asset to your car. Liabilities? Vacations are a liability. When you pay for a vacation on a card, you are only deferring the costs. After the vacation, you only have memories. Pizzas, movies, concerts, fancy dinners, fashionable splashy clothes and such are drags on our monthly budgets if we decide to place them on our card. These things have virtually no value after we pay for them and have the experience of the movie etc. You want to go to a concert or a movie? Save your money for it. Make it a special part of your budget. Paying for it with saved money is much more satisfying.

Use the card to purchase assets. Your school books are an asset to your education. If you use your card to buy household items, use it for furniture like a couch. Then you are buying an asset for your house. Then, when you sit on that couch and write out your checks for your bills, you are sitting on your asset. J (A little banker humor.) But, think about it, if you suddenly fall on hard times, you can sell that couch and pay down your card. You can’t sell the memory of a concert or the taste of a meal from three months ago.

Also, whenever one uses their credit card, consider how you will pay it off before you charge it!

Here are some other ideas fresh from my blog:

  1. When establishing your first credit, consider using a secured credit card; a card where you have to make a deposit in a savings account in order to establish and maintain the card. The money on deposit is your collateral for the credit. You now have an additional incentive besides maintaining our credit to be on time with your payments; your own money is at stake. Meriwest Credit Union offers this type of Secured Visa Card. Info on our Secured Visa Card is here.

  1. Another secured type of credit option is the credit union share account loan. Most credit unions have this. You make a deposit to an account and then take a loan out against the funds in the account. As you pay it back on time, your CU lets the credit bureau know and it helps get you get established in managing credit. Secured Share Account Loan info is available here.

  1. When you get your first credit card, do not celebrate. There are those who like to go out and get a quick pizza or a movie when their new credit card arrives. A new credit card is not a good excuse to go out to spend and celebrate.

  1. Avoid gas cards issued by Shell, Chevron, and other oil companies. Those who are new to credit are often unaware that gas purchases on oil company cards have to be repaid monthly. Only repairs and major purchases, (tires, transmissions, etc.) can be paid over time.

  1. Check your credit report annually at to verify your current outstanding credit and prevent identity theft. Do you see a card on your report you didn’t order or apply for? If you are reviewing your report annually, you can take action fast and stop identity theft.

  1. It seems simplistic, have a budget and plan your spending. A good budget can keep you from using your credit cards to supplement your monthly budget and help you pay off the debt you already have. 

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Our next Free Financial Education Workshop will take place Dec. 11th at our Main Office. 

Credit Myths and Repair
6:30pm to 7:30pm
5615 Chesbro Ave
San Jose CA 95123

Please RSVP with Greg Meyer at or 408-365-6328

Friday, November 1, 2013

Financial Tips, Ideas and Rules of Thumb

All my life, people have been giving me tips. Some were much better than others! Here are some of the more useful tips I have picked up over my years in finance.

#1- Don’t bank at a bank. Bank at a credit union.
Save time, money, and hassle! Be an empowered member of a credit union rather than a powerless customer of a bank. Since credit unions are not for profit corporations, they give their earnings back to their members, not stockholders. Keep more money in your pocket with better interest rates on savings accounts and lower rates when you borrow. Enjoy more available ATM’s than any of the big banks can offer and significantly lower fees than banks charge.

Credit Unions also offer shared branches and ATM’s. When you need to make a deposit and you are not close to your regular credit union, you can go to a shared branch or ATM and make that deposit to your account from virtually anywhere in the nation. If you bank with Meriwest Credit Union you can make a deposit at a shared branch of any other CU! Would Bank of America let you make a deposit to your Wells Fargo Bank account at their BofA ATM? Or inside the Bank of America branch? No way! Only Credit Unions do that.

Don’t pay monthly for something that should be free!  I am talking about your checking account. Your credit union can provide you with a checking account that is free of monthly charges. We specialize in free checking accounts.

General Rules
Save 10% of your take home income. If you are over forty and just starting to save, you might want to up that to 30%. The 10% rule has been around for years. The 30% for over 40 rule is new.

Your emergency fund should equal six months’ worth of income. After college, this is the first thing you save for after landing your first job.

If you are not willing to pay cash for it, then it makes no sense to buy it on credit. If you don’t want to pony up the cash, why would you want to pay interest on it?

When buying a car, add at least 10% on to the purchase price of a new or used car to allow for sales tax, registration, and license. In states with lower sales tax than California, consider your sales tax plus at least 1% of the vehicle’s value for registration.

20/4/10 rule of thumb for buying a car. You should pay at least 20% down, finance for no more than four years, and the payment should be less than 10% of your income. The first part of this rule prevents you from owing more than the car is worth, and the last two parts prevent you from buying more car than you can afford.

No Brainer Retirement Rules

Do not invest more than 10% of your retirement savings in your employers stock. It is a good idea to diversify, no matter how much you love your employer!

Rule of 72: To determine how long it will take an investment to double, divide 72 by the annual return/interest rate. If you’re earning a 7% return, your money will double in approximately 10 years. But if you’re getting 12%, it takes only six years to double up your original investment.

Always accept the employers match on your 401k. It pays to put in at least the minimum to get all the match dollars you can.

Unless you are retired, never touch your retirement savings. Period, end of story. Retirement savings is not for buying a home, a car, an engagement ring, or anything else but retirement!

( Want to learn more about what you can do to improve your chances for a comfortable retirement? Our partners at CU Financial Partners can provide you with the advice you need to retire worry free! An appointment can be set with them at any of our Financial Centers. )

Credit Rules
Always pay off your highest interest rate cards first. There is no benefit in you paying interest to a financial institution. Work to pay off your highest interest rate cards first. After paying them off, take the dollars you were paying on the highest rate debt and add them to the money you are paying on the next highest interest rate debt, and so on down the line until all debt is paid. This process amplifies the speed with which you pay off your debt.

Don’t cosign loans for anyone. Maybe you want to help your kids and that’s fine. You know your kids and whether or not they will be good payers on the debt. It is a judgment call. But, don’t cosign for relatives, in-laws, friends, boyfriends, girlfriends, Baby Mamas, and Baby Daddies!

Refinance your home when interest rates have dropped by 1% from your current mortgage. I have trouble with this rule as every time you refinance, there are costs involved like loan fees, points, title and documentation fees. If I had a 7% mortgage rate, would I refinance when rates dropped to 6%? And again at 5%? Consider the costs of your refi, if the cost is more than 1% of the loan amount, you might wait until rates drop farther to make it a better deal for you.

Don’t take out more in student loans than you can expect to make the first year of your new job. If you are going into social work, your annual pay may be in the vicinity of $35,000. It does not make sense to have a $50,000 student loan bill. $50K in student loans would be more inline with an engineering or computer science degree. The idea here is to give the new graduate a fighting chance at paying off their student loan debt in a reasonable amount of time.

Meriwest Credit Union
 November 9th and 10th at the Meriwest Credit Union Main Office 
5615 Chesbro Ave, San Jose CA 95123
Come to see our wide selection of late model, gently used cars offered at bargain prices by our MCU approved dealers.