Credit unions vs. banks: Things to consider

Mother depositing check on smartphone

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?

More about...Banking

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Beth
Beth
6 years ago

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!

Justin @ Decisive Dollar
Justin @ Decisive Dollar
6 years ago
Reply to  Beth

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!

CU Member
CU Member
5 years ago

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.

CU Member too
CU Member too
5 years ago

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.

Alex
Alex
6 years ago

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.

Stefanie @ The Broke and Beautiful Life
Stefanie @ The Broke and Beautiful Life
6 years ago

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.

Money Bunny
Money Bunny
6 years ago

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?

Jonathan
Jonathan
6 years ago
Reply to  Money Bunny

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.

Mrs PoP
Mrs PoP
6 years ago
Reply to  Money Bunny

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… Read more »

Carly
Carly
6 years ago
Reply to  Money Bunny

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.

Heather
Heather
6 years ago
Reply to  Carly

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.

Megan
Megan
6 years ago
Reply to  Carly

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.

Holly@ClubThrifty
6 years ago

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!

Adam
Adam
6 years ago

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/

Dee
Dee
6 years ago
Reply to  Adam

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.… Read more »

Mary B.
Mary B.
6 years ago

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.

Kristin Wong
Kristin Wong
6 years ago
Reply to  Mary B.

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!

B
B
6 years ago
Reply to  Mary B.

Please, what is the name of your credit union?

FI Pilgrim
FI Pilgrim
6 years ago

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!

Kristin Wong
Kristin Wong
6 years ago
Reply to  FI Pilgrim

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.

Jenne
Jenne
6 years ago
Reply to  Kristin Wong

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… Read more »

Mrs PoP
Mrs PoP
6 years ago
Reply to  FI Pilgrim

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!

Brian@ Debt Discipline
[email protected] Debt Discipline
6 years ago

I use a credit union, no fees, plenty of ATMs, online backing etc. I have never considered switch back to a big bank.

Dave @ The New York Budget
Dave @ The New York Budget
6 years ago

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.

Rob
Rob
6 years ago

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… Read more »

Sara
Sara
6 years ago

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… Read more »

Christopher M
Christopher M
6 years ago

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

Carrie
Carrie
6 years ago

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.

Carrie
Carrie
6 years ago

I should have added the Lake Michigan Credit Union has comprehensive online banking that is very easy to use.

Lisa
Lisa
6 years ago

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… Read more »

Jenne
Jenne
6 years ago

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… Read more »

Deborah
Deborah
6 years ago
Reply to  Jenne

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… Read more »

butterbean
butterbean
6 years ago

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???

Ellen Cannon
6 years ago
Reply to  butterbean

Pro Publica has been following the payback of the bailout funds. Follow along!
http://projects.propublica.org/bailout/

Honey Smith
Honey Smith
6 years ago

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.

surfingslowly
surfingslowly
6 years ago

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.

El Nerdo
El Nerdo
6 years ago

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… Read more »

Paul in cAshburn
Paul in cAshburn
6 years ago
Reply to  El Nerdo

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… Read more »

Jason
Jason
6 years ago
Reply to  El Nerdo

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.

tracy
tracy
6 years ago
Reply to  Jason

ING (CapOne360) gave me one free checkbook.

Anne
Anne
6 years ago

El Nerdo,

“Resistance is not futile.”

Best line I’ve heard all week.

Emily
Emily
6 years ago

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… Read more »

Lee Rhodes
Lee Rhodes
5 years ago
Reply to  Emily

Banks do the same. It is a banking reg.

Walt
Walt
6 years ago

“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.

Jason
Jason
6 years ago
Reply to  Walt

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.

lmoot
lmoot
6 years ago

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… Read more »

Jess
Jess
6 years ago

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;… Read more »

Kelsey
Kelsey
6 years ago

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… Read more »

AJ
AJ
6 years ago

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… Read more »

stellamarina
stellamarina
6 years ago

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.

Amy
Amy
6 years ago

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… Read more »

Sam
Sam
6 years ago

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.

Carla
Carla
6 years ago

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… Read more »

Gina
Gina
6 years ago
Reply to  Carla

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… Read more »

ali
ali
6 years ago
Reply to  Carla

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… Read more »

PawPrint
PawPrint
6 years ago

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… Read more »

Adam
Adam
6 years ago

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).

Loretta M
Loretta M
6 years ago

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… Read more »

Crystal
Crystal
6 years ago

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.… Read more »

mark
mark
4 years ago
Reply to  Crystal

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.

Lizzie
Lizzie
6 years ago

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.

Megan
Megan
6 years ago

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… Read more »

Anna
Anna
6 years ago

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… Read more »

Teinegurl
Teinegurl
6 years ago

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… Read more »

Julie
Julie
6 years ago

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,… Read more »

NW Berean
NW Berean
6 years ago

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.

Ross
Ross
6 years ago

Great post! Definitely something I need to look into more this year.

Jennifer
Jennifer
6 years ago

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.

Jessica
Jessica
6 years ago

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… Read more »

Micro
Micro
6 years ago

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… Read more »

Jason
Jason
6 years ago

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… Read more »

Dave S
Dave S
6 years ago

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.

Nick
Nick
6 years ago

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..

Jason
Jason
6 years ago
Reply to  Nick

If you trust the FDIC, they back CUs the same as banks.

getagrip
getagrip
6 years ago

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… Read more »

SJWilliam
SJWilliam
6 years ago

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… Read more »

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