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10 Reasons Why Credit Unions Kick Ass
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Credit unions exist to help its members. Commercial banks exist to enrich their shareholders.
You read that right. Credit unions are unions that exist to help its members. That’s why they often have better interest rates on both loans and deposits. Commercial banks are businesses. Their sole purpose is to figure out how to make more money from its customers (you!). Interest rates are often very low (or nonexistent), loan rates are often competitive, and they always try to sell you new products because you are a customer.
Credit unions, by law, have to have membership requirements. Credit unions are often tied to a geographic area or particular group, so as long as you qualify you can join. The Pentagon Federal Credit Union is one of the better known credit unions, because of their once mighty CD rates (still competitive if you look 3+ year terms), and if you weren’t active/retired military or worked in defense, you could be eligible to join just by joining the National Military Families Association. So there are membership rules, but there are ways around them and here are ten reasons why you should try to find a way:
- Better interest rates on loans: At Tower Federal Credit Union, a credit union in Maryland, the current rate on a 60-month loan for a new car starts at 4.75% APR. At Bank of America, the nation’s largest commercial bank, the current rate on a 60-month loan for a new car starts at 4.95% APR.
- Personal loans are more likely: The prospect of getting a personal loan at a credit union is much higher than at a commercial bank. In a theme that you’ll see repeated in many other reasons, credit union relationships are much stronger and so the likelihood of getting a personal loan is higher as non-financial factors are taken into consideration.
- Better interest rates on deposits: At TFCU, the regular checking account earns 0.25% APY while the regular checking account at Bank of America earns nothing. While I wouldn’t recommend putting your savings in a checking account, the fact that you can earn something, while your money is waiting to be spent on regular bills, certainly beats earning nothing. The current savings account rate is 1.40% at TFCU versus 0.20% APY at BoA on the Regular Savings Account.
- Lower fees: There are no minimum balance requirements at TFCU for their checking or savings account. At BoA, you need to keep at least $300 in your savings or have an automatic monthly transfer of $25+ to avoid a $3 fee. If you use a non-TFCU ATM, there’s a $0.75 fee; if you use a non-BoA ATM, that’ll be $2.
- Fewer customers, better relationships: At a huge bank, you’re an account number. They see so many customers throughout the day that there isn’t really any opportunity to build relationships. At a smaller bank, you have a better chance to forge those relationships with the employees at that bank. Credit unions are often much smaller and naturally more conducive to this.
- Fewer customers, you’re more important: How many customers does Bank of America have? Let’s say you want to get an erroneous fee removed, do you think it’s easier at your local credit union, where you’re one of a few thousand, or at Bank of America, where you’re one of a few (hundred?) million?
- No call centers: Credit unions, and other smaller banks, often answer their own phones. Have a problem at a larger bank? You might call in and find yourself talking to someone at a call center. Call centers aren’t all bad though, they often get a bad reputation, but I prefer a bank employee over someone at a phone bank reading off a script.
- You can be involved at a credit union: Did you know that the Board of Directors at a credit union is comprised of members who volunteer their time, are unpaid, and elected by the union membership? If you don’t like the direction your credit union is going, you have a say in it.
- NCUA insurance: Just like commercial banks and their FDIC insurance, credit unions are protected with NCUA insurance. NCUA stands for the National Credit Union Administration and the NCUA insurance limits mirror that of the FDIC.
- Less profit-driven, takes fewer risks: When you are beholden to shareholders and have the pressure to constantly generate bigger profits, you might be tempted to take greater risks. We see the fallout of that mentality today, with banks failing left and right. Credit unions aren’t immune to loan defaults but when you don’t feel the constant pressure to generate profit, you don’t take on those riskier loans. That leaves a healthier financial institution. To date, 25 commercial banks have failed in 2008 (including some of the biggest national banks), only 9 credit unions (with some being very small, like Meriden F.A. Federal Credit Union with ~$337,968 in assets).
All quoted example rates are as of December 12th, 2008.
Credit unions rule! If you want to read more about credit unions and banks, here’s an article on the differences between Thrifts, Credit Unions and Commercial Banks.
Do you have a credit union account? Have any other reasons I missed on why credit unions kick ass?
(Photo: Consumerist)
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I love my credit union. We have a national bank for some things but we love our credit union. The credit card interest rate (this goes with loans) is also lower through the credit union. Not that we carry a balance most months, but it is comforting to know.
I love my credit union.
I have a four-digit account number.
I can call them and a person answers immediately. I can say “Hi, this is Glenn Lasher” and they will be able to find my account info with no further ado.
I get easily 2-3% better rates on my loans/CCs than I got at my previous commercial bank (HSBC),
When offering CDs, they list both the APR and the APY to save you from having to calculate.
I get 4X the interest on my savings account compared to HSBC.
Best off, their (one and only) ATM is in the front lobby at my office.
Of course, there are negatives. They have, as I just mentioned, only one ATM, and it is withdrawal-only. They don’t charge foreign ATM fees, but foreign ATMs surely do. Also, the office hours are a little iffy, but I can conduct most of my business by mail and rarely have to actually stop in.
I am slowly closing accounts at HSBC, one-by-one. I should be totally clear of them in a couple of years.
When I was in college, I joined a credit union that is the largest in PA. Since then, I have moved to Maryland. Although I moved and there are no local branches, it is still my primary bank. You cannot beat anything that they have to offer. They savings rates are percentages above the rest and you cannot beat their lending rates. I don’t think I will ever leave them.
I’ve always heard how great credit unions are and had to hustle a little to join the popular one here. I’ve never found the rates to be better than competitive banks in the area. The customer service is about a C and they fired a friend of mine after 20 years of service, just a few years before retirement. When they changed the name to “Elevations” they lost me.
I’m all for small local banks.
Like Adam, I belong to PSECU (my wife joined while in school in PA) and it is absolutely the best out there. The rates are definately great for almost everything (I’ve found that their mortgage rates are a little on the high side) but the best thing about them is that reimbuse ATM fees. Sicne they don’t have any brick and mortar buildings in NJ (where I live), they actually reimburse you for ATM fees. Say I use a Wachovia ATM and get charged $2.00. PSECU will deposit $2.00 in my bank account at the end of the month. I think they will only reimbuse up to the first 3 or 4 withdrawls each, but still, its the only bank I’ve ever hear of that does this.
I got my mortgage through a credit union, they had much better rates and were more flexible. Their savings rates aren’t any better than other banks though. The first credit union I belonged to was better, they gave out dividends at the end of the year to all members.
My credit union kicked MY ass when I sought a $200 loan to get out of PaydayLoanLand.
I guess my credit union figured I could make the payday loan payments but not smaller payments at a reasonable interest rate.
I love my local Credit Union, they have all kinds of little services for no extra charge, even a Coin counting Machine for the members to use free of charge.
Very timely post as I’ve been thinking of switching to a credit union lately.
Thanks!
Good list. Credit unions are far superior to commercial banks in just about every way. They care more about their members because the members are owners and offer superior interest rates and financial products.
Love credit unions…I have accounts at 4! Customer service, products, access, they have it all
PenFed
Alliant
MECU
DuPage
Would have to totally agree. One key aspect is service. A couple months ago when we were shoppong rates for a land loan, we couldn’t even get our calls returned from the bigger banks (including our bank). The local credit union was extremely helpful in vetting us the info we needed.
Can you tell me the details of the credit union that offers land loan
-Thanks
varsityboyz
I still have to research what credit union to join….I don’t even know what to look for.
-Eric
Try culookup.com to find a credit union. You can search for credit unions by zip code as well as membership type (i.e. military, community) to see where you can join.
Thanks Steve
Very good points about Credit Unions. I have been praising my Credit Union for years now and have gotten many people to switch to them. Before I joined my Credit Union I was with one of the big national banks and they sucked money from me constantly with fees of all kinds. When I ran across the differences between giving my business to a local Credit Union and the big bank I was shocked. I will never do business with a big bank again!
FYI: I posted a link to this post on my own blog discussing Credit Unions because this is great information.
I hear amazing things about credit unions, however, I don’t have an account with one. Fortunately for me, my mom is the branch manager at a Bank of America, so almost everything is comped
Credit Unions pay zero taxes. Bank of America paid $2,350,491,000 in taxes (28.5% of income) to the US and local governments in 2008. That’s the reason credit union deposit rates are generally higher and loan rates are generally lower than commercial banks. Credit unions have a free ride and unfair advantage.
I noted that the only complaint on this board was about Elevations CU. Even though I moved to another state I have kept my account at Elevations. They have always had higher rates for CD’s, IRAs,etc. than commercial banks and their credit card rate is only 8.9%.
They have made a couple of strange mistakes in the past but when I called them about it they got to work and straightened it out. The employees are usually very polite. Only had one that was sort of rude.
I joined the Fort Sill Federal Credit Union in Oklahoma years ago and they where great. I received my first loan in my life there. I only use credit unions. No fees is a big draw for me. Presently I am with Tower Federal Credit Union in Maryland. I would recommend a credit union to anyone. If you are a little apprehensive about joining do this. Qualify to join and start a savings account there to test the waters. Then begin comparing your commercial bank with the credit union. I bet within a year you will transfer all your business to the credit union.