Fed up with high bank fees? Better deals are available at credit unions!
If you’re getting tired of paying increasingly high fees and penalties to your bank while getting only pennies in interest every month, you’re not alone. A growing number of Americans are now closing their bank accounts and moving their hard-earned cash to credit unions instead. What if you were to do the same? Would you really be treated any better, and would it be worth the hassle?
Credit Unions vs. Banks
The main reason consumers tend to have better experiences dealing with credit unions is that their corporate structure is totally different from the banks’.
- A credit union is owned by its customers, each of whom automatically becomes a member. Every member has voting privileges, irrespective of their total deposits or how much they have borrowed – which makes credit unions unique. In contrast, a bank is owned by its shareholders, whose interests are always given a higher priority than those of its customers.
- A credit union is a non-profit, whereas a bank is in business to make money for its shareholders. Thus, the focus for a credit union shifts from profit to customer service. Since credit unions don’t pay taxes, there’s more money to go around, too. If there is a profit, it’s distributed to members in the form of a dividend. You’ll also be pleased to learn that the members’ money isn’t used to pay the kind of sky-high salaries and bonuses that bank executives receive.
Lower Fees and Loan Rates
If you go overdrawn or bounce a check on your credit union account, you’ll have to pay a fee and/or a penalty, but it will still cost you far less than your bank would charge. It’s less likely to pay ATM withdrawal fees, electronic banking or checks with credit unions, and your accounts will have slightly higher interest rates. Both of these factors are likely to add up in a nice interest dividend for you each month.
Mortgages, auto loans, or other loans from credit unions often have competitive interest rates, and that can save thousands over the lifetime of a loan. For instance, the current average rate on a 48-month car loan from a credit union is 5.15 percent, though one from a bank might feature a rate of 6.34 percent. If you have a one year adjustable mortgage from a bank, you would usually pay 4.73 percent, but one from a credit union could have a rate as low as 4.32 percent.
Credit Cards are Cheaper
A recent Pew Charitable Trusts survey found that credit unions charge 20 percent less interest on credit cards than banks do. Only 25 percent of credit unions charge a fee for transferring your balance from another credit card, compared to 88 percent of banks. A word of caution, however: make sure your credit union issues its own credit cards. Many of the smaller ones simply offer credit cards issued by the major banks such as Chase, in which case you’d be subject to Chase’s fees and conditions.
Loans are easier through credit unions
Since credit unions mostly stayed away from sub-prime mortgages, they were largely unaffected by the recent credit crisis that is still making the banks reluctant to issue loans, even to those with good credit. Credit unions have taken up part of the slack, and have been increasing their lending lately. If you have a decent credit history and FICO score, your best option for a loan might be a credit union.
Who is eligible to join a credit union?
You might think credit unions are open only to specific groups, and that you have to belong to a particular trade union, church or ethnic group to join one. Finding a credit union that will take you is incredibly easy these days. There must be something in common with other members, but the rules are pretty relaxed these days as credit unions are often occupation or community based.
There are several online resources where you can find out more about credit unions and locate one that will accept you as a member. There are plenty of benefits to switching accounts to a credit union instead of a bank!
