Revisiting the credit union vs. bank debate: Which is better?

Judging from the comments in Kristin Wong's article “Credit unions vs. banks: Things to consider“ back in January 2014, there was a lot of interest — and a fair amount of skepticism — in what credit unions have to offer.

The sentiments went in a lot of different directions. People were quick to point out that interest rates on deposits at credit unions were usually much higher than at banks and interest rates on loans were generally lower.

A lot of people were very appreciative of the level of service to be found at most credit unions; but quite a few mentioned how difficult it might be to switch from one institution to another, particularly when it came to all their bill-paying information.

Others were concerned that credit unions wouldn't have the ability to integrate with online budgeting programs and apps, while some indicated that their particular credit union worked just fine with their favorite budgeting system.

But that was fully a year and a half ago already. How much of that is still true today?

The relationship of banking and community

A lot was said about community in the comments of Kristin's article. A couple commenters echoed Justin's concern:

“I haven't used a credit union because my residential location has never been ‘permanent enough' for me to feel comfortable making that commitment.”

Apparently, some people move too frequently to consider themselves part of the community that certain credit unions serve and decline to become members because of that. Yet there are credit unions that offer membership to anyone regardless of geographic location, and shared banking also helps to eliminate that concern. So do banks still offer fewer geographic restrictions than credit unions today?

Considering the concept of community in a different light, AJ kept accounts with both types of institutions but definitely felt a strong connection to the Navy Federal Credit Union:

“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.”

It's hard to ignore that people value their community relationships, even when it comes to their banking relationships. So can we say that customers are completely comfortable working with an institution they can't visit or feel connected to?

No clear winner?

Even though the overwhelming majority seemed to favor credit unions, it was still hard to draw any hard-and-fast conclusion back then. There were some very strong points made in favor of banks as well. For example, Jason's comment reminded readers that restrictions govern some credit union accounts:

“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.”

Jason also said:

“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?”

Getagrip hasn't bothered with a bank for more than 20 years, but still agreed that:

“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.”

Ascribing value

On balance, it seemed that both credit unions and banks deserve the loyalty of their customers — and many use both types of institutions. But as an industry, banking is evolving rapidly. Many of the advanced services are offered first by the large banks. I think people make their choices based on the value they ascribe to various banking services. Convenience is a big factor, obviously. Banking relationships are important to customers. But then again, so are interest rates.

So what are the advantages of credit unions vs. banks today? What is your favorite credit union or bank — and why? What do you want to learn about credit unions' and banks' services today?

More about...Banking

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JoeM
JoeM
5 years ago

At least for my local options, credit unions offer worse hours than big banks (close earlier, sometimes no Saturdays), some don’t have great mobile apps that allow things like mobile check deposits, and the rates are laughable – oh you offer 0.10% interest instead of 0.05%? Whoop-de-doo. I agree with the comment about the very few and rare 3% CUs. They require too many hoops to jump through and have really poor ATM locations. No, I don’t want to go to a 7/11 to withdraw cash. I have Chase for checking and two credit cards, while I use Ally as… Read more »

Michael
Michael
5 years ago
Reply to  JoeM

I would agree with Joe. I had a Credit Union for a while as I wanted to see if it was worth switching from my bank (chase) and it just wasn’t convenient for life. Yes, their fees were lower, but a) I have had direct deposit as long as I remember so that knocks out most bank account fees, b) I have never bounced a check so that fee isn’t really a concern, c) I live by Chase and there is almost always a Chase where I travel (if not, which is rare, I accept a few dollars in fees),… Read more »

Erin
Erin
5 years ago
Reply to  JoeM

Agreed, I bank with a credit union and had some trouble with the hours. At my last job I got paid on the 1st and 15th (now I am on the every-other-friday schedule), and this was a huge problem if payday fell on a weekend. The rest of my coworkers got paid on the first, and I’d get paid on the following monday, because they processed payroll deposits by hand! I’ve stuck with them because of my car loan, and it’s gotten better since switching companies and because now I’m in a place where I have more saved up to… Read more »

Kyle
Kyle
5 years ago

I have UW- credit union and citizens bank of Mukwonago. A tiny growing local bank with less than 10 offices and a credit union that caters to alumni and workers in the university of Wisconsin system. Both been great, I’m just happy not to deal with the mega banks. I do pay cash or credit cards for most things so I don’t have a lot of business with them.
I’d like to think I’m a super saver, right now I’m trying to get to saving 50% of my take home income.

Ali @ Anything You Want
Ali @ Anything You Want
5 years ago

I have accounts at both a credit union and a bank. I like the credit union because it gives me a better interest rate on my savings. I also like the fact that I can call and speak with a real person, although their customer service seems to be changing for the worse recently. I like the bank because it has ATMs everywhere and is very convenient.

I would be curious to know about peoples experiences with smaller, regional banks and if those perhaps hit a middle ground between a credit union and a large, national bank.

AzJoe
AzJoe
5 years ago

I have used both credit unions and banks for most of my financial life (50+ years). I find each to have positive and negative traits and I adjust my usage accordingly. (Example: for years credit unions did not count on credit scores – I had to have a bank account and loan at a bank to get a mortgage, happily that is no longer true). Once you are a member of a credit union, you can change situations, including move, which would make you ineligible to join that credit union. However, if you keep your membership you can use that… Read more »

Greg
Greg
5 years ago

You’ve also failed to point out what the actual difference is between credit unions – and I think it makes a fair amount of difference. Banks are owned by shareholders and investors, and are therefore responsible to them to increase shareholder value. Credit unions are owned by the members that they serve, and are therefore responsible for increasing members’ value. You may find that different banks beat different CU’s or vice versa on certain features, but to know that my CU has my back and isn’t make decisions based on pleasing outside influences makes all the difference to me. I… Read more »

Sherry
Sherry
5 years ago
Reply to  Greg

I agree, Greg. I do most of my (CU) transactions online, but I know that if I need to talk with someone, the folks in the local branch are there to serve me, not behave as though it’s the other way around, as I experienced with some large banks when I lived on the west coast. I also receive 2% interest on my checking (no min balance) which I don’t see on any of the online banks’ offerings.

Kayla @ Femme Frugality
Kayla @ Femme Frugality
5 years ago

I’ve never used a credit union. I’ve always been pretty happy with my bank, so I’ve never switched.

Not Rich
Not Rich
5 years ago

Since Credit Unions work together I can go into any credit union and get banking done for free. I can also go into any 7-11 and use their ATM for free. Those two features combined give me access to more free ATMs and branches than any big bank can offer.

Michelle
Michelle
5 years ago

I’ve always belonged to a credit union and I’ve always enjoyed using them. We recently moved and they do not operate in the state we moved to, so now I am trying to decide what to do. It’s a tough decision but at least for now they are a part of shared banking so I can go into pretty much any credit union and still do things.

Valerie
Valerie
5 years ago
Reply to  Michelle

I haven’t lived in the same state as my credit union for almost 10 years now, and it’s never caused me any grief. The only tiny drawback is that I don’t get to choose my own pin on the very rare occasions that I need a new debit card. I do all my transactions online, direct deposit, use local Co-op atms for cash, and on the incredibly rare occasions that I need to do something in person, I can walk into a local credit union and they’ll do it for me through shared banking. No fees ever without restriction, not… Read more »

Shaun
Shaun
5 years ago

I work for the largest credit union in Arizona, so I am obviously not an un-biased source. However, I was banking at a credit union for a good 10 years before I started working for them. Greg’s comments about ownership are spot on. Most credit unions also offer something called shared banking, which allows members to perform transactions at any other credit union that is a member of the shared branching network (most are). Also, we offer accounts that will reimburse you for any foreign ATM fees you might incur.

Ross Williams
Ross Williams
5 years ago

When we moved to Portland Or in 1990, my wife kept her account with her credit union in Minnesota. I moved my accounts to a local credit union from a Minnesota Savings and Loan. When we moved back to Minnesota, I kept my accounts with the Portland credit union, although I did add a local account with the same credit union she uses because it has more local ATM machines, as she did when we were in Portland. We still have all four of those accounts. Obviously office hours are not an issue, we do everything online. In terms of… Read more »

Tim R
Tim R
5 years ago

As the CEO of a small rural credit union, I am a bit biased toward credit unions. I think it comes down to philosophy. With the credit union being non profit organizations and owned by the membership it is there to serve the customer not necessarily profit to pay stockholders. While they may not offer all services I would ask all of you to try a credit union just once. Most of our customers say they cant believe a financial institution can and will do the things we do.

Jeanbe
Jeanbe
4 years ago

I moved to a credit union after my bank starting charging a $6.00 quarterly fee for my checking account even with my direct deposit. I called the 800 number and was told that is policy and cannot be waived. So I decided to go to a credit union and first moved my savings to the CU into a checking account and started to change my monthly bills auto pay to the CU. Had the direct deposit changed to the CU and when that was set went into my local bank branch to close my checking account. There they said they… Read more »

Paul
Paul
4 years ago

One of the best services from my local credit union is extremely competitive business checking. The fees and/or minimum deposits from all commercials banks were really onerous, whereas the credit union offered low/no fees for most services and a minimum deposit of $50. My needs are light, but I did want to separate business and personal accounts – the credit union was by far the best way to do so.

Duncan's Dividends
Duncan's Dividends
4 years ago

I agree with most people here that a credit union isn’t convenient for me and really doesn’t offer a ton of upside. What I’ve found with Chase and BMO Harrisbank is that neither really charges me fees and as long as I maintain good standing with them I don’t have to worry about it. With anemic rates across the board I actually don’t put as much into savings as I do into investments. Dividend growth stocks have offered a better return and a little more safety even with the added risk. Being that I’m mid 30s this risk is tolerable… Read more »

cathy
cathy
4 years ago

Use debt card

Juanita
Juanita
4 years ago

It all depends on what you are looking for. I have no checking fees but I never could borrow from my credit union. Longer lines at my current but better online tools

NoRoboGuy
NoRoboGuy
4 years ago

I think the best approach is to be agnostic to the debate over credit unions and banks, and instead focus on online institutions and the best interest rates for checking and savings. Look at both Consumers Credit Union and Emigrant Bank, for example.

Steve
Steve
4 years ago

Banks are a four letter word – what a coincidence. The bottom line difference: banks exist to earn money for their shareholders. Credit unions exist to serve their members. Want to receive low interest and high loan rates? Go to a bank. Want the opposite? Go to a credit union.

Debbie M
Debbie M
4 years ago

One thing I like about my credit union is that it’s the same company I started with 25 years ago. When I first moved here, I got an account with a Savings and Loan. That was bought several times, each time by bigger and more obnoxious companies with worse policies, so I switched to the credit union which was never bought.

The one time policies got worse at the credit union was when they replaced one kind of checking account with your choice of three different ones, all of them worse. Almost immediately they reinstated the old kind as well.

Courtney
Courtney
4 years ago

My husband and I have accounts with a bank, credit union, and online bank. Each has its advantages: the credit union provided the best rate to finance a care purchase. Our online bank accountings offer better high-yield savings account rate. We have been with the same bank for years, and that has provided us with a certain level of benefits.

I think each institution exists to address different financial needs. My husband and I select the best type of institution based on the financial goal we’ve set.

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