1. Lake Michigan Credit Union has sparse National locations. Choosing a credit union has a lot of great benefits, like membership, but they usually lack the BIG in big banking. If you’re in need of a teller and you’re not in Michigan, you’re probably out of luck. Sometimes wires or other transactions may require a notary or authorization in person. Without a local branch nearby, you could be stuck. Juxtaposed with Big Banking, you’re likely only a few miles away no matter where you are in the country.
2. Missing out on credit card cash back rewards. Recently, a group of friends and I went out after the Detroit auto show. When the bills came nearly all of them pulled out their LMCU 3.00% Max Checking debit cards. I looked at them and asked why. Turns out you need to use your debit card several times a month in to earn your 3%. This leaves lots of cash back from credit cards on the table. With credit cards offering cash back, rewards, miles, or similar bonuses for using their cards, you should be able to earn 2% or more on average on your combined purchases. Assuming you’re putting more than $1,875 a month on your credit card, you’ll be losing money if you put every purchase on your LMCU debit card instead of receiving cash back or rewards.
3. Just-In -Time for finance. In my business classes at Calvin I learned about just-in-time inventory. A concept that is still being used and optimized in businesses today. Basically, you try to keep as little in inventory as possible. This reduces your non-productive assets and creates a more efficient business in which every dollar invested has a purpose. Today, we can do the same for personal finance using a linked Schwab One® Brokerage Account. Instead of a checking account, people can stay invested in the markets and hopefully make profits while being able to withdraw funds from that account for everyday purchases. Using this method prevents any cash from just sitting there and creates a Just-In-Time financial position wherein no dollars are being inefficiently used.
4. $15,000 limits. Once you hold more than $15,000 in your LMCU Max Checking account, your cash is no longer earning 3%. Given that single income households should have an emergency fund equal to 6 months of required expenses many people may hold emergency funds larger than $15,000, and this limitation can be a major problem. Consider, the household making $200,000 a year. After taxes and savings, they likely have a spending budget of 132,000 a year. Of which most is made up of fixed, unchangeable costs like a mortgage, student loans, car payments, private school and more. Assuming these fixed expenses add up to $7,700 a month, they’ll need an emergency fund of $46,200. If all of this is held at LMCU’s Max Checking and if they’re capped at $450 a year in interest ($15,000 x 3%), the household will realize an effective interest rate of less than 1%. This rate only gets worse when savings are increased. Certainly not what you would hope for when increasing your savings.
5. Full disclosure, I just opened an LMCU account. I’m not using their Max Checking for reasons #2, 3 & 4, but I have heard they’re a great credit union and they have several convenient locations for me around Grand Rapids, MI. Every institution has its pros and cons, and it is up to you and your financial advisor to decide on what is the right choice for you.
*Be sure to consult your financial advisor, tax professional, and lender before making any changes