Credit unions vs. banks: Things to consider
One of my money resolutions is to switch banks. I’ve been a long-time customer of a big bank that, in recent years, has stood out among headlines that reveal sneaky and unethical business practices. That’s not the only reason I’m switching, but it does help me want to change. So, it has got me thinking bank vs. credit union?
Some people think credit unions aren’t terribly convenient — maybe they don’t have online banking, or maybe it’s hard to find an ATM when you’re traveling. But I’ve found that, despite the potential inconveniences, there are advantages to consider when it comes to a credit union. Here are a few things I’m keeping in mind as I make my decision.
Interest Rates
The main draw I’ve often heard about credit unions is they offer lower interest rates on loans and higher interest rates on savings.
Auto loans and mortgage loans
In 2013, financial research company Datatrac analyzed the average interest rate differences between credit unions and banks. When it came to car loans, banks’ interest rates were about two percent higher. When it came to mortgages, rates were very similar.
Savings yields
The National Credit Union Administration also regularly analyzes the average rates of credit unions and banks. Their latest data (June 2013) found that the average “regular savings” rate for a credit union was 0.14 percent. The national average for banks was 0.13 percent.
But when it comes to choosing what works for you, you’re probably less interested in average and more interested in best. According to Datatrac, the “bank high” savings rate is 1.06 percent. The credit union high is 3.00 percent, which is awesome, but not necessarily accessible.
For example, I researched the credit unions in my community that I might be approved to join. On the high end, those credit unions offered an APY of 0.25 percent. My current bank offers 0.50 percent, and the bank I’m considering offers 0.85 percent. So while credit unions have the overall reputation of having higher interest rates, I guess it really depends on what’s available to you in your community. But with a credit union high of 3 percent APY, it’s definitely worth looking into.
If you’re getting a car loan, it’s probably best to go with a credit union. But I’m not a big fan of car loans in the first place (though I understand people have their reasons), nor do I think I’ll need one anytime soon. At this point in my life, I’m only concerned with interest rates when it comes to saving. On average, credit unions have better rates, but I’m not sure I have access to the high rates mentioned on these reports.
Related >> Why I plan on driving my car into the ground
Fees
Credit unions are known for having low to no fees on their accounts. And while they may offer free checking and even checking with interest, I’ve come across a couple of banks that offer the same thing. Many credit unions require no minimum to open; the bank I’m considering doesn’t require a minimum deposit either.
Related >> Checking Accounts
What’s more, according to a July 2013 article from the Washington Post, credit unions have been hiking up their overdraft fees faster than banks.
“The report shows that banks have held the median overdraft charge at $30 a transaction for the past four years, while credit unions have upped their price from $25 to $28 a transaction in the past two years.”
Related >> Getting Over the Overdraft: How I Started Saving
On the other hand, “fees are still lower on average at credit unions as of the first three months of 2013.” I’m not planning on using overdraft protection, so this doesn’t really affect me, but I thought it worth noting. An article from The Street also confirms the misunderstood stereotype that credit unions = no fees.
“Unfortunately, many who make the switch assume mistakenly that just because they’re banking with a credit union, they’re not going to be charged fees. The truth is that credit union members are just as vulnerable to fees as bank customers — a fact that is rarely shared or acknowledged.”
Most people with credit unions love them and attest that they don’t pay fees. And I’m not saying most banks don’t assess ridiculous fees, but it does seem like the whole “no fee” thing with credit unions might be a little overrated. I’m not knocking credit unions; I’m just saying, if I switch, I don’t think fees will play a huge part in my decision.
Business Model
Structure
Here’s where credit unions win, by far — the way they’re structured.
Credit unions have a reputation of being more personal and focused on community, and there’s a reason for that. When you open an account with a credit union, you become a shareholder. In fact, the operators of credit unions are members themselves. As Michele Lerner explained in a Get Rich Slowly question:
“First, unlike banks, credit unions are financial membership organizations. You don’t open an account at a credit union, you become a member and use your deposits to buy shares in the business.”
Credit unions are also community-focused because a lot of their members belong to a similar group. My old company, for example, had a credit union. My university had a credit union. In Los Angeles, there are a lot of entertainment-industry-related credit unions.
Theoretically, credit unions are private cooperatives that are owned and operated by their own members, the advantage being that local money stays within the community. Many people like the idea of that and, according to credit union members, it usually translates to a better “customer” experience.
Profit
While banks want to make money and appeal to investors, credit unions are not-for-profit, and their investors are their members. Any profit made from a credit union is supposedly returned to its members in the form of low interest rates or lower fees (although there’s been some recent controversy over the industry overusing these profits on advocacy efforts).
Overall, though, a non-profit structure usually translates to: a) not feeling like your financial institution is trying to take advantage of you, and; b) not seeing your financial institution’s name next to the words “crooked” and “discrimination.”
While they’re certainly not immune to questionable practices, the structure of a credit union seems to provide a better overall experience, and most credit union members attest to that.
Overall, I suppose it depends on what you’re looking for in a financial institution. Both options — credit union or bank — have their advantages and disadvantages. There’s also the long term to think about. You might feel that, in the long term, the structure of a credit union may serve you better. In the long term, rates may be significantly better. Either way, in making a decision, there are a handful of things to consider. Loans, rates, business model, fees and convenience are all factors that could affect one’s decision.
I’m still deciding, so I’d like to read your thoughts. Do you use a credit union or a bank, and what are some benefits and drawbacks of each?
Become A Money Boss And Join 15,000 Others
Subscribe to the GRS Insider (FREE) and we’ll give you a copy of the Money Boss Manifesto (also FREE)
There are 100 comments to "Credit unions vs. banks: Things to consider".
In the past, I’ve shied away from credit unions because I’ve moved around a lot. I also have a long-standing history at the two banks with whom I deal, and that has been advantageous when hunting for mortgages.
Still, I’ve been wondering if I’m missing out, so I think I might do some research. This post is a great start, thanks!
I am in the same boat as Beth, I haven’t used a credit union because my residential location has never been “permanent enough” for me to feel comfortable making that commitment.
Now that I’m finished with school, I would strongly consider signing up as the benefits in the article seem to outweigh the large commercial banks by a long shot. Interest on checking would be nice! Thanks for sharing!
Try Shared Branching!!! It’s a program that allows you to use your local CU from coast to coast. For example: My Credit Union is in FL but I travel for work. This program (which is free) allows me to access my local Credit Union from all over the country.
Most credit unions are joined by Shared Branching, which means that you have access to over 7,000 branches and 100,000 ATMs around the country, regardless of how “local” you think your credit union is. It’s one of the best-kept secrets of CUs, and I don’t know why they don’t advertise it. In short, I get NO surcharge fees on ATM transactions around the country because I am in a credit union. I made the switch from a bank two years ago and haven’t looked back. Laughing all the way to the bank, so to speak.
Currently use a Bank, although finding good interest rates is often difficult, unless they were to become competitive may be an option to look at Credit Unions.
As a professional actress I’m ALWAYS on the go, not just around town but nationally and internationally so being able to access and manage my money easily and “fee free” is monumentally important to me. I stick to online banking. If, however, I was looking into settling down and picking up a mortgage or other major loan, I might look into my credit union options.
Is is possible to have account 1 at $big_bank and then account 2 at $credit_union? That way most of the money is getting a good rate, but the ATM’s don’t fee you to death?
Sure, there’s nothing to prevent having accounts at any number of financial institutions. My mother has accounts at 3 banks and 2 CUs. She uses banks like most people would use different accounts with the same bank, and then complains because she can’t transfer money.
That’s exactly what we do.
Acct #1 is at a big bank which is incredibly convenient for things like depositing checks and sometimes sizeable amounts of cash from rental income. They also coincidentally service our mortgage, which is very convenient.
Acct #2 is at a credit union located in a state where we used to live. Our car loan (since paid off) was with them, and their short term savings rates are decent, but not the best.
Acct #3 is at Ally (online bank), which we use strictly for medium term savings. It takes a day or two to move money from Ally to the other accounts, and we’re limited by the number of times we can pull money out of the Ally account without a fee each month, but it works well as a safe and very liquid savings vehicle.
There may not be any need to do this. My credit union offers a monthly refund for any atm fees up to $20. I don’t use the atm much but I’m definitely not afraid to since I know that I (effectively) don’t have to pay for the atm fee. I think my credit union offers this because they only have 2 locations (I think that’s why they also provide the ability to deposit checks online or through their app). The point is – look around as atm fees may not be a big issue.
Also, there’s a big network of credit unions that often allow you to bank at other credit unions in different places, giving you the convenience of a big bank.
My credit union belongs to the CU Service Center network. I’ve moved a lot the last few years, but I’ve always been able to find a local, network credit union to do my in-person banking and use their ATMs fee-free. It’s probably not as convenient as belonging to a big national bank, but it is worth to me to continue to belong to my credit union. However, I might have to rethink the out of state credit union when I need a mortgage.
I just switched from Fifth Third Bank after almost 15 years of doing business with them. It was a huge pain in the butt to move all of my online bill pay over and get everything set up and I’m glad it’s over with.
I moved everything to Chase because I like the convenience of using a large bank and their online interface. They also lured me over with two coupons, one for $200 if I opened a savings account and another for $125 if I opened a checking account!
For what it’s worth, small banks aren’t much different from credit unions. I use a small bank (6 branches total), and I get 1.81% interest on my checking, ATM fees refunded, and free checks.
Since you’re looking for a new account, try seeing if there is a bank that has a Kasasa account near you, they’re great:
https://www.kasasa.com/
Agreed. I’ve been a member of a local bank (10 branches in two counties) for about twenty years. I first joined because one of my good friends worked there and I was really impressed with how well they treated their employees. FYI, I’ve been banking at the same branch for twenty years, and I’ve been dealing with the same employees, so clearly they know a thing or two about keeping people. Free checking, interest-earning checking account, free money orders and cashier’s checks, and the rare times I’ve had something weird that would have invoked a fee, they’ve always waived it. There is something to be said for local, community-based banking!
Love, love, love my credit union! I had to switch from my big bank where I had been a customer for a number of years because of its deceptive fees and business practices. My checking account at my credit union earns 2.75% interest (unheard of!) and I have yet to be hit with any type of fee.
I have actually yet to experience any drawbacks.
That’s an awesome rate, Mary! Especially for checking. It’s interesting that I’ve heard plenty of people complain about their banks, but I can’t recall ever hearing a credit union member complain. Not to say that this is proof that credit unions are better, but I do think it’s telling!
Please, what is the name of your credit union?
I haven’t switched to a credit union because of technological shortcomings. I really enjoy my ability to download transactions to Quicken or YNAB, and the ability to use online bill pay. Some credit unions have been making strides in this area though, so I might have to take another look!
Oh, snap. I didn’t even consider how using a credit union might affect online budgeting tools, that’s a great point. I mean, if the rates were good enough I wouldn’t care about the convenience, but if I’m already leaning in favor of a bank, that might push me over.
Don’t make a decision about credit union vs. bank generally based on tech– some credit unions have excellent techological services, some banks have awful ones. Find out what credit unions you qualify for, and then find out what their services are.
P.S. It used to be that it was a good idea to sign up for the credit unions you qualified for and keep a small account there even if you didn’t use it much, just to maintain length of membership, because if you *did* want/need a loan, they would give you a better rate if you’d been a member longer. I don’t know if that’s true anymore, but I do know my VISA and loan rates have been consistently much lower through my credit union account that is 26 years old now.
I’d check the individual credit union. Our credit union had mobile check depositing from your phone or tablet before Wells Fargo did. And we’ve never had an issue connecting the credit union to mint. Our recent Citibank credit card on the other hand… their web interface was a nightmare!
I use a credit union, no fees, plenty of ATMs, online backing etc. I have never considered switch back to a big bank.
Personally, when looking at banks, I only consider what is most convenient for me in terms of locations, fees, atm reimbursements, etc.
I don’t really care about interest rates as all of them are too low for me anyway, encouraging me to invest any excess cash elsewhere and keep just enough for a healthy cashflow.
My bank account balances are therefore low and interest rates don’t affect me nearly as much as the convenience factor does.
I thought the same things about credit unions before I started working at one. I have been employeed here 7 years and it is much better than the local bank I worked at prior.
Most credit unions are small, but many partner in credit union service networks. This gives members the ability to access their money when they are away from their home branch. We have had members withdraw money from foreign countries and have had nonmembers come in from all over the world (this is free to the member). As a member at my credit union you have access to over 30,000 ATM’s (no fee by us). We have a website that you can download your statements, we have a mobile app, later this year we are rolling out remote deposit capture. This is very common for credit unions. We join together to “keep up” with the big banks. Take another look at your local credit union. They probably offer all the services you want and will treat you like a person, not a number.
I’ve split the difference, myself. I have my car loan at my local credit union, and got a great APR on it. I also use them to hold different savings accounts like my emergency fund and Christmas fund because I have to physically drive to the building to get my money (their website is fairly limited), which keeps me from impulsively or accidentally spending that money.
What I don’t use them for is checking, because I’ve found a local bank that offers free ATM usage anywhere in the world. Any fees paid at non-branch ATMs are automatically reimbursed. I was even able to use it to get Euros out of an ATM in France without paying either an ATM or exchange-window fee. To be fair, this isn’t a big, national bank – they’re only available in my state – but they’re certainly bigger than a CU and thus able to offer some nice perks.
So basically I’m using a bank for my spending money and a credit union for loans and savings. So far it’s working out great.
Great post.
Definitely move your money to a credit union – it’s easy and worth it! We wrote a song about it:
http://www.youtube.com/watch?v=KC8DIETX–k
You don’t always have to live in a specific place to join a credit union! I am a huge fan of Lake Michigan Credit Union, which I belonged to for years even though I lived across the country and have never even been to Michigan. It gave me 3% interest on up to $15,000–in checking! It was fabulous to earn $35 a month on my emergency fund. (I only stopped because I quit my job to travel, and without direct deposit you can’t earn the 3%). I *highly* recommend checkign it out.
I should have added the Lake Michigan Credit Union has comprehensive online banking that is very easy to use.
Yeah, I left Bank of America too (that’s who we’re talking about right?) in large part because of the regular headlines about their behavior. I also was not impressed when they offered me a HELOC at a rate higher than my VISA card (!) and one third what I requested.
I have a mortgage and HELOC with my employer’s credit union (which gave me much better terms on the HELOC). I keep ten dollars in checking and savings accounts there in order to qualify for membership.
I switched to a regional bank. I would have liked to join a community bank but I work in DC and live in Maryland so I wanted a bank with branches in both locations.
My first time posting but I read GRS every day. Thanks for the great blogging and inspiration!
I use a credit union for one set of my accounts (including the loan I just paid off) and our family uses a local, small, privately owned bank for the joint savings and checking.
I started using my credit union account (which is based in another state!) about 20 years ago after the fourth time my local big bank was bought out, this time by a big bank that had given me customer service problems when it bought out 2 of my previous bank accounts. Uncredited deposits, lost cards, messed up paperwork, and just generally an attitude that my account was too small to bother with, had greeted me with each new bank takeover.
My credit union has had excellent phone and online banking and online bill pay for a far longer time than any bank I’ve dealt with, and also a good debit/credit card solution, so that’s been a plus. Any financial institution you work with nowadays you want to check out how their online banking works before you commit, if you can.
While I do pay an ATM fee for the credit union transactions (unless I cash a check on my credit union through my local bank, which I’m happy to do), I find the credit union’s programs and accounts work well for me. Most credit unions have a lot of services which don’t have a minimum balance, as well as partnering with other organizations– I get a discount from my auto insurance for credit union members, and I can get free financial planning advice if I want to visit a credit union branch.
While my local bank doesn’t have sunday hours– many do, especially ones that have grocery store branches– they do have extended Saturday and drive-up hours plus coin counters in most branches, and because it’s local we have lots of branches near us. I travel a lot but find that I mostly use debit/VISA card services rather than cash, so that’s less of an issue. (We have WaWa convenience stores in the Atlantic states, also, which years ago managed to lock PNC into no-fee ATMs!)
In any case, dealing with local banks and my credit union has saved me lots of time over the years, in that I don’t end up spending hours over the phone dealing with bank mix-ups as I did when I dealt with large banks, and neither credit unions nor the small banks I dealt with have been taken over since!
My story is similar. After suffering through serial bank buyouts – each one accompanied by degraded service, questionable business practices, and increased fees – I switched to a credit union years ago. I’ve experienced nothing but good service and am very satisfied with a convenient location, ATM network, online banking, free checking, good interest rates on savings, 2% interest on a 24-month car loan, and an unbelievable 7.5% credit card interest rate (really nice when I needed to carry a balance for a couple of months.) The only time my credit union couldn’t provide a service I needed was when I wanted to cash some Treasury I-bonds to use as part of the downpayment on my home. For that, I had to visit a bank. So… daily advantages versus one inconvenience in 8 years? I’ll stick with my credit union.
I love my credit union account! I use it for online bill payments and to maintain an emergency fund. But my main reason is to reward them for never taking federal bailout money during the 2008 crash……
BTW, did the big banks ever pay back the bailout money???
Pro Publica has been following the payback of the bailout funds. Follow along!
http://projects.propublica.org/bailout/
I use a credit union for my LLC because they were the only no-fee and no-minimum business accounts I could find.
I have a big bank account (no fees because I direct deposit my paycheck there and do an e-transfer to savings once a month) for the convenience.
I stash my long-term cash in an online-only bank.
One thing that is left out of most Big Bank versus Credit Union comparisons is that credit unions partner with each other. That means I can go to any credit union for free, even when traveling. Also the ATMs at 7-11s are free. This gives you more free ATMs than a big bank can offer.
I have USBank for business and a credit union for personal.
The CU lets me deposit checks free via phone app. USBank charges 50 cents per uploaded check.
USBank has free billpay but I have to buy checks (I get them at Costco). CU lets me do free billpay and also free echecks to anyone I want so I don’t need a checkbook there.
USBank has an office near my rural home; CU doesn’t but other CU ATMs are on the same system so that’s all I use.
USBank doesn’t have safe deposit boxes in my town, CU has a safe deposit and cheap too but it’s a long drive there for us.
USBank lets me download transactions to Quickbooks and/or sync with them, CU probably does too but I’ve never needed it AND it has its own version of MInt that lets me see where the money is going.
USBank CEO gets paid 18 million dollars a year, but I like the service I get from them. No idea about CU salaries but I like that it helps decentralize financial power from the megaplayers. Resistance is not futile.
My wife was with USBank in the late 90’s when we married, and she was getting fee’d to death.
We consolidated with USAA FSB, and the aggregation of all our accounts resulted in us being eligible for a higher level of service (called Wealth Management, but it’s really just free basic financial planning assistance.)
I also still belong to Ent Federal Credit Union because it’s my oldest account (good for credit score, I think) where I keep a few hundred dollars on account for them to lend out to military members at 4% while they pay me 0.2% – and I deduct the difference as a donation to the USO. (Just kidding. The USO and Salvation Army are both actual charities I support, but I don’t deduct the interest arbitrage. It just makes me feel good to support a military-supporting credit union.)
The 50 cent charge by US Bank for smartphone check deposits is unusual. Chase, Fifth Third, and Ally provide free smartphone deposits.
I don’t think anyone offers free checkbooks anymore, unless you’re a new customer or have like $25,000+ on deposit. E-checks should be free everywhere.
ING (CapOne360) gave me one free checkbook.
El Nerdo,
“Resistance is not futile.”
Best line I’ve heard all week.
I absolutely love my credit union! It’s a bigger one that spans almost throughout my entire state. One thing to look into is any special deals the credit union makes with another bank. One big advantage of mine is that the company made a deal with US Bank for us to use the ATMs with no charges. That makes it accessible. One other advantage is that when it comes to pay day and paying bills, the bank always processes the incoming check first before doing auto-pay. So your concern about overdraft fees might already be avoided. I also love how quickly my member points build up. For every direct deposit, online logging in, online money transfer, regular deposit…you name it, I get points. These are applied for free checking, cancelling checks, skip-a-payment, and lowering interest rates. I’d suggest looking into these benefits when weighing your decision!
Banks do the same. It is a banking reg.
“Both options – credit union or bank – have their advantages and disadvantages.”
Really?
Per the article:
*Savings rates: Advantage CU’s
*Loan rates: Advantage CU’s
*Fees: Advantage CU’s (though shrinking)
*Business model: Advantage CU’s
Not mentioned:
*Online banking for many established CU’s is solid & comparable to offerings of the big banks.
*For travelers, many CU’s participate in cooperatives that provide ATM and even branch access that rivals any bank.
There were a lot of caveats behind each “Advantage CU” within the article.
Savers are better off with an online bank, but borrowers should certainly consider a CU.
I thought about switching to a CU, but from what I’ve seen so far, many lack the convenience of the checking account I have with my brick and mortar bank, and the rates associated with my online bank, Ally. I’ve noticed a trend that the more convenient banking is, the less the interest rate paid, and the less convenient (ex. wait period, online only, less ATM coverage), the higher the rate.
I like having different institutions to meet my different needs. Ally is where I keep my long-term savings, CD’s, and overflow checking (anything over what is needed to pay the month’s bills, and can wait a while, earning the higher interest, before being transferred to my everyday checking).
I use my brick and mortar bank merely as a handoff to billers. I also have my mortgage there and love being able to talk to someone face-to-face and having a designated loan rep, a free notary, a place to go to on my lunch to deposit cash or checks. I may keep a few extra hundred beyond what is needed for that pay period’s bills, for emergencies, but I’ve never had to use it as my CC is more convenient, I get points, most places take it, and I have a 30-60 day buffer. Plus I’m never more than 2-3 business days from my savings.
If I’m traveling, particularly in an area where credit is less used, I may pad my checking account with extra cash just in case. Personally I love the flexibility of having multiple banking institutions. It keeps me from being cornered into a situation I don’t want to be in (ATM fees, low interest rates, lack of coverage when traveling). It’s always nice to be in a room with both a window and a door 🙂
Hubby and I use a local credit union. Growing up I used Bank of America (under my parents’ account/s), then in college I opened up a rainy day fund with HSBC online (got a credit card there as well). After I graduated and “grew up” I eventually moved all my money to the credit union – they have branches near my workplace and my home, hubby was already using them, and we had plans to combine money anyway since we knew marriage was down the line.
Pros: It’s super easy to move money between accounts; they service our (refinanced) mortgage; ATM fee reimbursements (only $5/month, but given how infrequently I use ATMs at all, not really an issue for me); electronic check deposit through their app; easy to use money tracking function through their web site (also easy to use); free checks (I have more than I can possibly use in a lifetime). Oh and my paycheck gets deposited before “actual” payday. Not sure if that’s standard these days but it’s pretty sweet.
Cons: I kind of missed the check-reading, envelope-free BoA ATMs… except now that I can deposit checks from my phone that’s not such a problem anymore.
I’m a big fan of credit unions. We went with a fairly large on in our previous city that had ATM locations (including quite a few grocery stores, etc), fantastic online banking, and a bunch of other perks. When we moved, we went with the credit union that had an ATM right across the street from our house, which was a bad call. When we’re about town their locations aren’t as convenient, and I HATE their online banking. We should have gone with the larger credit union in town even if it meant that I couldn’t just walk across the street to deposit checks.
Either way, though, I think credit unions are the way to go. I find that I just feel better about using them.
My personal checking account is with a big bank and all my savings are online, but my husband does all of his banking with Navy Federal and we have our joint checking account there, too. I never had a reason to complain about my own banks, but I will say that Navy Federal does an amazing job of helping out its members, especially during sequestration last year. There is something to be said for the community aspect of a credit union. Although we’re lucky to live in an area with several locations, I rarely find myself needing to go in–they reimburse any fees we incur for using other banks’ ATMs, and with the internet, we can take care of pretty much all other business online.
I use a big bank for no fee checking accounts but all my savings accounts and emergency account is with credit unions. The best thing at our local tiny one store credit union is the santa club…4.6% . Too bad that there is a $2.500 limit on that but I get 1% on regular savings.
I am another huge fan of credit unions. We live about 1000 miles from our CU. With the online services available, I have not needed to go into an office. If we do, they have ‘shared branching’ with other CUs. We can use almost any other CU ATM, and even the one in the nearby 7-11 for free.
Honestly, I see little to no merit to banks. We had a mortgage that was a slightly lower rate, but the bank tried nickling and diming us. We got a letter once telling us our payment was late – not because it was late but because they increased our Escrow amount and we didn’t notice. They were going to charge a late fee because they wanted to hold onto more of our money. So, even if they seem slightly cheaper, the fees make it less so.
We recently refinanced with our CU, so it is all in one place – and I couldn’t be happier. I really don’t understand how a bank could be better than what we have.
I’m with a traditional bank, although there is a new credit union near us that I want to check out. Like you, I’ve researched the CUs but the ones that have more open membership seem to offer very similar rates for savings and CDs as traditional banks, have not researched them for loans.
I’m another person who has shied away from credit unions due to not feeling stable where I’m living. I’m someone that sometimes want to see someone in person; and though I do just about everything online, banking is one of those things that I sometimes want a person, not a phone prompt.
I could be behind the times but I assume credit unions don’t have online bill pay, smartphone check deposit, 24-hour customer service (sometimes I like to call my bank at 11:30 at night) and other conveniences that make my life easier. I could be totally wrong though.
My safe deposit is also at my current big bank.
Carla – maybe there are some credit unions that would live up to your fears, but you can also find credit unions that offer just as much as any big bank.
I’ve been a long time credit union member. I utilize online bill pay every month and it’s flawless. I can access it 24/7. I can log on to my accounts, open up new savings accounts, check my credit card statements, etc all from an online interface that’s available 24/7.
I have a free checking and 5 free savings accounts there (they serve different purposes. I also have my small business checking and savings there.
And I have a credit card issued from there.
In the past (not right now), I’ve had CDs there. I can open a CD and manage it entirely from the online interface.
If I DO for some reason want to go to a branch, I can do so until 6 pm weeknights, or 8 to 2 pm Saturdays.
They also have drive through tellers.
They also have a network of ATMs where withdrawals are free.
They also have arrangements with a number of other credit unions – if I’m travelling and need to go to a credit union, I can go to any credit union across the country in their network and it’s as if I’m in that branch.
My credit union offers mortgages and car loans.
Oh, and my favorite part – they have in-house investment advisors for securities/retirement accounts. It’s a sister-company but you go to the credit union. The reason this is wonderful to me is that if I need a medallion stamp to sell securities, all I have to do it go to my credit union. I’ve used this in the past and it’s a free service for members of the credit union.
Love, love love my credit union.
My credit union has online bill pay, they have apps for tablets and phones, mobile banking, text banking, check deposit via phone, they partner with TurboTax, there are no ATM fees AND they reimburse you for ATM fess (up to $25 a month), you can transfer money. The only problem I’ve had is with the smart phone check deposit, but I think the problem is my phone.
There’s also external funds transfer, to transfer between accounts I might have at other institutions, Pay Other People which can send money to other people, and you can actually open a subaccount OR a new account completely online.
I’ll be honest, I’ve never had a bank account. When I was a teenager my parents used a bank and had some money in an account for me and my brother, but the bank raised the limit and started assesing fees so they switched to a credit union.
Now that credit union is huge. It used to be for select invidiuals but they changed their charter and name and you basically have to live or work in two or three counties and I think the majority of people I knew had an account here. The only problem with getting big is they started having some issues the big banks did in terms of customer service.
I’ve traveled all over the country and even over seas and never had an issue with using an ATM card to withdraw money.
Oddly enough Mint.com has my info for my current (much smaller CU) but not my older much larger one.
We’ve been members of the same credit union for over 30 years and have lived in four different states. The shared banking is great because the nearest office isn’t that close, but there are several other CUs nearby. Once we unknowingly used an ATM that had fees, and the CU refunded the fee. It has bill pay along with great rates. The checking account pays 3% on any amount up to $10,000 (they lowered it from $25K, which I wasn’t happy with). You do, however, have to have 12 POS transaction and a direct deposit. That has been an issue a couple of times, but I try to check near the end of the month to ensure I have 12. However, I think that’s the way it works with bank rewards checking, too.
For people who travel a lot, many Credit Unions are part of what’s called the co-op network, which allows you to use co-op network ATMs anywhere across the country. Pretty much every 7/11 I’ve been to has a co-op ATM.
As far as online banking goes it probably depends on the credit union, but mine has had it for just about as long as I’ve been a member (at least 8 years now).
I used to belong to both a credit union and a bank. The credit union’s only ATM was in the lobby of the building and it was difficult for me to ever go onsite to make any traditional or ATM transactions. Still, I kept it so that when I was ready to buy my house, I could take advantage of those awesome interest rates. Well, when it came time to take out my home loan, they refused me four times! Their explanation is that as a single woman with my salary, I was not a good risk. No amount of explaining that I live frugally and look at previous handling of money would change their mind. After getting a much more expensive loan, I have never, not even once been late with a payment, and am even paying the priciple down early. So for me, that credit union was a total waste of time.
Yes, CUs can offer lower rates, but do you know why? It’s because they are do not pay state or federal taxes. Please understand that the federal tax exemption is costing the government $1.6 billion this year alone. That is $1.6 billion that needs to come from somewhere else… namely, the general public. Please be aware that when you patronize CUs, yes you will be gaining money on a higher interest rate (deposits) or a lower interest rate (loans), but you as an American citizen will see higher taxes and fees in other areas of your life as a result.
Also, all banks are not created equal. There are tons of small, local, community banks that are just as personal and caring, if not more-so, as CUs. These banks also have modern technologies such as: online bill pay, online banking, remote check deposit, etc. and have access to a large network of ATMs for their customers.
It’s obviously down to personal preference and how strongly you feel about the larger picture and the impact it has on our country’s taxes. Yes you may get a lower interest rate on your mortgage, but the government may raise your property taxes, or vehicle renewal fee, or individual income tax rates, to make up the money somewhere else down the line.
This is a misleading comment, and my guess is that you work for a bank. Yes, credit unions don’t pay taxes… because they are NON-profit entities. Just as other non-profits don’t pay taxes.
Banks pay taxes only on their profits…which they earn by charging high fees and paying low savings rates.
Feel free to pay more for financial services at a bank if you want, but realize that for every $1 in profit you generate for the bank they pay $.13 in taxes. That’s for suckers…not for patriots.
Longtime bank customer turned credit union devotee here. I fled my giant national bank for a local credit union a couple years ago mostly because said bank announced monthly fees on checking accounts during a recession. (Tone deaf much?) But the credit union’s higher rates on savings and lower rates on loans/credit cards were also a big win. I’ll never go back to a for-profit bank if I can help it.
I have used banks and credit unions but 90% of my financial life is though USAA. I believe that at this point most of the USAA products are available to anyone, not just military members and their families, so I think this is well worth a look. Consumer Reports consistently rates USAA well for banking, finance, and various insurance products. I think their online interface (including mobile apps) is excellent and they are the only institution I interact with that “gives good phone”. What I mean by that is calling up their customer service is helpful, efficient, and I never feel like they are trying to push me products I don’t need.
I really like having most of my financial life at one institution because they can look at my situation holistically and make smart recommendations that a bank with only one or two accounts wouldn’t have the perspective to comment on.
The idea that credit unions don’t offer online banking or fee free ATMs is either outdated information or a myth. I currently bank with a credit union that has a nationwide network of fee free ATMs (all 7 Eleven locations, plus more) and has a nice online banking system that includes bill pay, mobile check deposits, online statements, etc.
I switched to a credit union when my online bank was bought out by a company I refuse to do business with. I looked into a lot of different banks/CUs before switching, and while there are some credit unions that don’t offer online options & ATM networks, there are CUs and small local banks that offer all the amenities of the Big Bank, but with better rates and MUCH better customer service. Just do a bit of research, know what services you want, and pick a bank or credit union that offers those.
I have my checking account with a state bank here but our state is really small. I love them! I was able to get fee reversed , they have extended hours , saturday hours which is great when your work a typical 9-5 because its hard to get to the bank on time sometimes. I like their customer service. I even had a 401(k) with them before i closed it. I used to bank with another state bank and i hated the customer service and i got fee’d to death. I also banked with credit union before for a car loan and it was such a hassle for me! Even though they had better rates on loans it was just terribly inconvient and i did not like the customer service at all! it wasnt worth it to me. I think once you find a bank/credit union stick to them because it’s worth it’s weight in gold vs. all the headaches it could cause if you dont like them
We love love love our credit union, though we use a mix of CU/big bank/online bank for our accounts. We were at BofA (checking, savings, credit card, etc) but they started to charge all these fees. What finally sent me over the edge was when they suddenly raised our credit card interest rate with no warning and no reason. When I called, the reason they gave was a five year old medical bill that had been taken care of years ago. After I pointed that out and was lectured on how to use a credit card (despite no late payments, being well within credit limit, etc) I finally cut the guy off, told him he would receive a check in the next couple of weeks to pay it off and we would be leaving after being customers for 15 years. We followed through and have never looked back.
Our credit card at our credit union has a super low rate (not introductory) and the customer service for that and our checking and savings accounts has been amazing. We have no trouble accessing our money, the online tools are great, and they have helped with other small things BofA used to charge us for like medallion signature service.
Our last several dealings with banks were: a charge for having a savings account (2 institutions); a notice of overdraft mailed from Maine when we live in Washington >7days transit time (our only & last one); constantly changing terms & conditions; general fees. Since then we have been member-owners of 1 credit union which is local and easy to work with. Unless credit unions are banned we will not be with another bank as a primary monetary service.
Great post! Definitely something I need to look into more this year.
I have used credit unions for over 25 years. They offer online banking; electronic bill pay; mortgages; debit and credit cards; ATMs; and auto and other loans. All with lower fees than a bank.
I love my credit union. I’ve been with them for 14 years now and I haven’t had a bad experience yet! The customer service is great, the rates are comparable to big banks, the loan process is very easy, online banking and electronic bill pay is very convenient and they have a network of ATM’s to choose from so I don’t worry about fees. When I got married we added my husband onto my account and closed his account at the big bank he had banked with for years. He loves the credit union too and wouldn’t go back to a big bank again. Good luck with your decision!! 🙂
I’ve been a firm supporter of credit unions. One that I have an account with actually provides gives interest for a balance on a checking account. it’s not a lot but I need to keep money there to pay my bills so I might as get a little something for my money. I also like the knowledge that their main goal is to serve members and not shareholders. Sure, statistically speaking, they might be hiking up overdraft fees faster than banks, but I keep up with my account balance so I’m not at risk of overdrafting my account. So that really doesn’t matter to me.
Thanks for the balanced writeup of banks vs. credit unions.
It seems like the “party line” among personal finance bloggers is blindly in favor of credit unions based on unquestioned stats. For instance, we know the best savings rates are found at online banks. There are no online credit unions competing with them. And what good are low auto loan rates if you follow sound advice by paying cash?
Some CUs advertise 3% rates on checking accounts, but you only get it by jumping through hoops: 12 debit transactions of a total dollar amount, balance restrictions, etc. Those of us who primarily use credit cards for spending (and pay them every month) have little to gain by losing out on the credit rewards in return for another 2% in interest.
In regards to banks, if you have a good history, they will refund fees if you simply call ask nicely.
As other commenters have noted, there are very good locally-owned banks and credit unions in almost every region. Either way you go, it pays to find a good fit and build a relationship with them. Your bank/credit union wins your business, and in return their local ownership allows them to bend the rules when you need it.
Plus, if you chose a local bank that’s publicly traded, you can also be an owner by purchasing shares.
In general smaller banks and credit unions are so much better in terms of simple customer service. I often find the bigger banks have the new college grad required to try sell me credit card or car loan every time I am in.
Any difference in interest is non-argument for me as online banks or investment accounts are places to keep any significant sums.
I like the idea of Credit Unions but the scale worries me. Banks have been around for ages and despite hiccups have prevailed. If I had to choose it would probably be a bank. Great post, thanks for sharing..
If you trust the FDIC, they back CUs the same as banks.
Regardless of a credit union or bank you need to look at what they provide and assess how it meets your needs. Just as different banks have varying policies, many credit unions also have different policies. With respect to the APR they pay out you also have to look at how they assess the interest.
For example, one credit union I dealt with assessed the interest monthly based on average balance in the account. Most banks do a daily run. This can make a difference based on how you treat the account and what your expectations are.
But overall I been with my current credit union for over 20 years and haven’t bothered with a bank. I found looking at the policies and fee structures of regional banks, most recently for my kids attending college where my credit union isn’t on campus (I looked past the “student” account to compare long term), that most banks don’t want you around if you carry balances in the low hundreds or a few thousand dollars. You simply aren’t worth their time and the fee and interest rewards show it. Since I keep my “revolving” money in those accounts and they rarely get much above a few thousand before I move the money off to an investment or use it on bills, most bank policies would fee me to death.
The only non-credit union banking I see in my future is online, but for brick and mortar the credit unions around me just meet my particular needs better.
We have our car notes (yes, we have two of them!) at our local credit union because the interest rates are low (around 2.5%). We also have a credit card with them because it was the lowest rate we could get at 10%. There used to be a balance on it, but thankfully it has been paid off. I keep our main account at the “big bank” because that bank cashes checks immediately, whereas the CU takes 5-7 days. Also, the CU credit card has been replaced several times due to fraudulent charges. Only had it happen once with the big bank card, and that was a long time ago. Finally, the CU seems to be a little slow on the technology side (my daughter has had some issues with them in regard to the Share Account and Savings Account and auto transfers of money). So for now, I am staying with the big bank.
I have been a credit union member since December 2009. The majority of my banking is done online or the telephone if I have questions. Am a very basic user. Don’t have the money to be otherwise.
My credit union belongs to an organization of credit unions that I can get cash from when I need it. Have done business inside, don’t know about the ATM’s. Live in Oregon and have done business with credit unions in New Mexico and Colorado.
The Colorado was a breakdown on the road and my CU worked with a CU in Montrose, CO involving me getting a loan from mine and a check to pay my expenses was printed up and handed to me in Montrose.
The interest on my Visa is 6.7500%. It was 21.00% at my bank, a major one.
The interest on my car loan is 4.5900%. Don’t know about banks on this. Also get the option of skipping two payments in a twelve month period, usually offered in December. Used the option in August to buy tires for the car.
I pay no fees. Bill Pay costs me nothing. Might be a limit on how many you can do for free.
Unable to make any comments on savings. GRS follower from way back and am learning to save, but not enough to comment on interest.
I don’t do overdrafts, so have no idea regarding them.
No drawbacks that I can think of.
Everyone who helped me in these three various CU’s treated me like a valued customer. It is really pleasant to walk into a business and feel wanted. Cannot say enough regarding the service I have received. Wouldn’t go back to a bank of any kind for love or money. In fact, don’t much trust them, especially the major ones.
If you are in Oregon, check out: https://www.osufederal.com/
I have been using Charles Schwab bank for about 5 years now, and Ally bank for savings. It is solely online and I haven’t missed going to the bank. I am able to take pictures of checks for deposit. There are no fees, and my checking account earns a bit of interest.
One of the perks is that they reimburse any ATM fees I incur from other banks, so I can use my ATM card anywhere.
I love my credit union and absolutely hate the big banks. I can walk into my credit union and deposit money without filling out any bullshit forms. Also, the fees with the big banks will literally eat you alive if you’re not careful!!!
I’ll never go back to the big banks!
I joined Consumers Credit Union (based in Illinois) last year, and I’ve been extremely happy with them. In addition to offering 3 percent interest on their checking account (almost unheard of), they also have a handy app that accepts mobile check deposits. I can even deposit cash at a local credit union (but honestly haven’t yet tried this method), and they reimburse ATM fees so long as you use your debit card at least 12 times per month. It’s really a good deal.
Credit Unions rule!! I am so thrilled to see this post. Credit unions provide care and attention to members that big banks never will. Credit unions make a point of finding needs in the community they serve or their SEGs resulting in happy members. If you need a loan, and you’re in a bit of a bind credit score-wise, CUs will do more for you than a bank ever will.
We’re on the opposite side. We left our credit union after many years because they added in a monthly account fee that they refused to waive. The only way to get rid of it was to use their debit card, which we didn’t want to do. We moved everything to our CapitalOne 360 (used to be ING bank). It is all online, the hours are better, and it offers mobile check deposits, AND the interest rate is better than we were getting at the CU.
I can only speak for Canada, where banking rules are different. I spent about 15 years at a couple of the ‘Charter’ banks here (in Canada there are 5 big banks that jockey for position, with a few minor competitors, and credit unions).
I joined our credit union 12 years ago for the following reasons (again, I emphasize this is in Canada specifically, I don’t know the overlaps or differences).
1. Deposit insurance. At a bank the maximum deposit insurance is $100K, in the (unlikely) event the bank fails, you will get up to $100K of your money back. At a credit union, they operate under a different insurance system and deposits are 100% guaranteed.
2. Lower mortgage rates. Every time I have got a mortgage or renewed my term I have shopped around quite thoroughly. My credit union has been consistently about 0.5-1% lower than any other offer.
3. Mortgage repayment opportunities. My mortgage allows me to increase payments by up to 20% with no penalty, and (this is big) pay up to 20% of the original principal once per year. I have never had that much, but I have been able to make many smaller payments – which have a good effect. This was not available or was more complex at any other bank.
4. Reciprocal ATM arrangements. Somehow all the credit unions in Canada (or at least in BC and Alberta) have arranged for free ATM use at any of their ATMs. I can make deposits at any credit union ATM, it doesn’t have to be my own.
5. Shares and shared growth. Every year our credit union pays out shares based on profits, as well as a small amount of whatever interest we have paid (into shares). Over the years this has accumulated into several thousand dollars in an additional asset – something that just doesn’t happen at a bank.
6. Community support. My credit union, on the direction of its members, supports a foundation that funds a huge number of community service organizations. This is a good thing, and the banks just don’t do it (excepting to get a tax break).
7. Flexibility. I have about 30 different savings accounts, all of them with no fees. Each has a name (i.e. annual lump sum payment, car insurance, car repairs, kids recreation, home repair etc). There is no limit on the number of accounts I can open, and they have all paid between 2.5-3.5% interest.
8. Service. Uniformly excellent every single time I have gone in for any reason.
9. They treat their employees very well. Our CU won the ‘best employer in Canada’ title several years running. See point #8, the two are connected.
There are many other reasons, but those alone make the choice very easy for us. Again, this is Canada and your mileage may vary.
#5 is interesting. I’ve belonged to two CUs in the States, but neither offered much in the way of profit sharing.
#6 isn’t entirely fair, in my experience. Many smaller local/regional banks give back to their communities in a lot of ways. The megabanks do too, although it’s obviously less personal for them. My hometown had three local banks until two were bought out in the 90s. The remaining one made a public commitment to remaining locally-owned and supporting the community. The city worked with them to provide low interest loan programs for artists to rebuild part of downtown.
I think the lesson is mileage varies among both banks and CUs. There are great companies under both business models (and some not-so-great under both models). The main difference is there are no mega-CUs to give their kin a bad name.
The drawbacks at my credit union are that if you want to withdraw money from an ATM out of town, you are going to pay a fee. My bank has multiple locations here in my part of the country, but not so the local C.U.
The other drawback, for me, is that the credit union website is very basic. Once I needed to prove that I had paid a bill, and a copy of the check was needed. Whereas at my bank I could simply go online and print off a copy of the front and back of my check for free, at the credit union I had to pay for them to print it off at their office. I like having more information from my account whenever I want it.
My bank is not perfect by any means, but they have been great through the years about grandfathering in my account. For 15 years I have never had to pay an account fee because each time the fee structure changes, I walk in, say my account was free before and I’d like to keep it that way. And they switch it back for me.
For anyone looking for a high yielding (at least higher than the big, national banks) this is the one stop shop for research => http://www.depositaccounts.com/checking/reward-checking-accounts.html
Why anyone would keep doing business with “Banks” is a testament to how well Americans have been brainwashed. Most banks have been proven to be criminals involved with criminal activity on a global scale and is especially true with all multinational banks.
If you believe in the movement to “Buy Local” you should expand your thinking to invest local & bank local – Credit Unions are local and invest your dollars in your community. The argument that banks are more convenient is lost in the fact that most credit unions today have a shared networking agreement so you can bank at any CU across the country and not pay a fee – unlike banks who still charge fees for ATM usage if its not your bank ATM.
Invest in YOUR community “Bank Local” don’t give your money to some multinational crime syndicate – has everyone forgot about the to big to fail bailout of the big banks who turned around and paid their CEO’s millions of dollars in bonuses? Bonuses that came from our tax dollars – REALLY!!! Americans have way to short of a memory, as for me, I will never forget or forgive…
Where do you get this criminal allegation.
Have you looked at all banks?
By the way…which banks are considered criminal?
I’ve been using credit unions since the early 1990s. I am now switching my money back to banks.
After credit unions got the big bonanaza of customers when everyone jumped on the fad of leaving banks for credit unions, the CUs got a big influx of money without doing anything to earn it. And some of them are spending it poorly. At the expense of their customers who are supposed to be members.
My current CU has been wasting money on new buildings and a “rewards” program that provides no rewards for the average customer. If you are one of the 1% they will reward you with cars and travel. If you are anyone else they will give you a key chain or a some other dollar store crap every few years. While they were increasing perks for the 1% they lowered their rates for savings, checking and such. Not sure who they are really catering to as the 1% would not put money in this credit union. (Or likely any credit union)
My bank, on the other hand, gives me better interest rates and none of the fees most banks are known for. And my credit card company has a real rewards program, that benefits me every time I use it.
If you are really trying to get rich you might consider where rich people keep their money and why.
I honestly prefer a credit union over big banks. For me, a credit union is a lot easier to deal with compared to banks and the folks at Oak Trust in Plainfield, Illinois just make the experience even better. Check out their website at http://www.oaktrust.com
The “cost of admission” is generally lower than a bank as well. Less red tape, lower deposit requirements. Most people who struggle to save set themselves up for failure because they set unrealistic expectations. For many, the first 300 or 500 is the hardest. That is usually the bare minimum at one of the big banks to open a basic savings account. The credit union I belong to has a $5 minimum savings deposit. No catches. Take a look at any of Mission Fed’s account minimum and you will see that its substantially lower than your standard commercial bank.
Part of the reason Credit Unions are so great is that there is an educational element built into their business model. Credit Unions have a different mission than banks. They want you to understand what you are signing up for—and how to manage your finances.
I honestly prefer a credit union over big banks. For me, a credit union is a lot easier to deal with compared to banks and the folks at Oak Trust in Plainfield, Illinois just make the experience even better. Check out their site at http://www.oaktrust.com
Being a college student, credit unions are much more convenient for me. I once had a national bank but just recently closed them for the second and last time. I just don’t like someone telling me I must maintain a $1,500 daily balance or swipe my debit card 10 times a month to avoid a hefty fee. That’s how majority of big banks are in my opinion. They have stipulations on every account and cater to the wealthy. I’ve been with my credit union since I was 15 and have never had problems. I enjoy my truly free account at my credit union with no stipulations
Credit Unions do not abide by standard practices that many banks abide by. My Credit Union did not even remember to deposit interest into my savings account even though no minimum amount was required. Unfortunately, I did not notice until months later. They did remember to deduct $1.00 from my account each month due to inactivity. They have selective memory. Thank goodness I do not use them on a regular basis.
My Acu at Manitoba charges nsf as per time of withdrawal i. e. cheque or auto debit. say you issue a cheque today for x amt and it was presented at 8:59 am. It is already nsf even if you deposit to cover the funfs at 9:00 am. My new bank president choice now waits until 11:59 pm same day for me to make the deposit. For a low end creditor like me… Acu is not recommended.
Thanks.
I’m wondering if the banks collapse here are the credit unions less invested in big mortgage companies, etc and are customers less likely to loose their savings ?
Kristin, solid article!
Thank you for providing the information within the ‘structure’ and ‘profit’ segments.
At thirty three years of age, I now, finally,understand that credit unions are mainly financial membership organizations offering shares to members. That paints the whole picture to me.
Danku!
SDCCU in San Diego, ca IS practicing unethical business practices and are sneaky in their business practices. 1) I caught them first hand by screen prints whereby the customer call center was told by a dispute department that a staff member was out due to emergencies etc. And when called upon they denied ever passing on these messages. I had 3 different call center employees and screen prints and verified the same response. When requested a call back… they denied they provided those responses to the call centers. 2. When applying for a HELOC the appraiser used comps from another community thereby skewing my value that showed me at 82% LTV, when I needed 80% LTV. My loan was denied. There were plenty of comps to use right in my own community. US Bank in San narcos, CA has show more credibility in 1 month vs SDCCU had to me in 15 year member.
Take heed. Credit Unions interest rates might be lower but one can never get their business,other than an account open. Im a govenment worker of 15 years. Who wants to do business with a bank who can NEVER assist me. I bought 2 houses, 2 cars, and with no help from SDCCU.
This has become an eternal debate these days: credit unions or banks? I would say both kinds of institutions are important, but choosing between them depends upon your financial need and ability to repay. All the best! You should always make a judicious decision when it comes to money! I have selected LUSO Federal Credit Union.
I would definitely choose a credit union any day.. 🙂