COMPARE Rates Before You Become a Victim of ‘Bait and Switch’ - From the CEO's Desk

Have you noticed lately that many credit unions and banks are placing big splashy ads in newspapers, newsletters, online ads, etc. touting their “low” loan rates or even “lowest” loan rates, but rarely do you see one of these institutions encouraging you, the consumer, to COMPARE rates. There is a simple reason for that. We do want you to compare at St. Paul Federal. We want you to compare our posted loan rates to any other credit union’s rates or bank’s rates, because we know that our loan rates are among the lowest, if not the absolute lowest rates in town. Make us back that claim up! When you compare, we also encourage you to ensure that you compare the relevant rate – “apples to apples” as they say.

Many times when other credit unions and banks advertise their “low” rates, they are advertising a rate on a loan for a term that few people will take. It’s called “bait and switch.” They will bait you in with the advertisement of one rate, knowing you are most likely going to have to switch to a different loan term and higher rate when you find out what the monthly payment will be on a loan at the advertised rate. For instance, I recently saw a credit union advertisement for automobile loans claiming that their rates were as low as 2.69% (our rate is as low as 2.39%, by the way, maybe not enough difference to make a difference?); however, one didn’t have to dig too far on their website to discover that the 2.69% rate only pertained to 36-month loans. Really? (the premier automotive research firm) recently announced that the average length of a car loan at origination was now 67 months: that’s a long way from 36 months. And that's just the average loan term. Many are even longer.

A cursory review of the loan rates posted on their website indicated that when the term jumped from 36 months to 48 months, hmmm, the loan rate jumped too – to 2.94% (our 48-month rate is still 2.39%, by the way). If you wanted a term of 60 months for a loan from this credit union, to try to get your monthly payment down to something affordable, you guessed it, they jumped the rate again – to 3.44% (our 60-month term rate is still 2.39%, by the way, a full percentage point less than their rate for the same term).

We heartily encourage you to compare rates when you are in the market to buy – whether you are looking at a car, a boat (now there’s another rate comparison story … perhaps for another day), an RV, a snowmobile, a house, or a line of credit. Compare, because advertised rates aren’t always what they appear to be. After you compare rates, apples to apples, I think you will agree that when St. Paul Federal says “low” rates or “lowest” rates, we actually mean it. And, do you know what comes with our low rates – for absolutely no additional cost? – an award-winning staff and the best service in the state of Minnesota. Yep, we’re prepared to back that one up too!


Tom Glatt, CEO

St. Paul Federal Credit Union

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