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10 Reasons Why Credit Unions Kick Ass

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Fire Police City County Federal Credit UnionCredit 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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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?
  7. 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.
  8. 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.
  9. 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.
  10. 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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46 Responses to “10 Reasons Why Credit Unions Kick Ass”

  1. Miranda says:

    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.

  2. Glenn Lasher says:

    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.

  3. Adam says:

    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.

  4. Val says:

    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.

    • Josh says:

      Maybe your friend deserved to be fired. People get fired everyday especially people that have been there for long periods of time and think they are better than other employees and can get away with more.

  5. Dave says:

    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.

  6. Miss M says:

    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.

  7. poor boomer says:

    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.

  8. Bill M says:

    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.

  9. TStrump says:

    Very timely post as I’ve been thinking of switching to a credit union lately.
    Thanks!

  10. Mppaul says:

    Love credit unions…I have accounts at 4! Customer service, products, access, they have it all :-)

    PenFed
    Alliant
    MECU
    DuPage

  11. jeff rose says:

    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.

  12. Eric N. says:

    I still have to research what credit union to join….I don’t even know what to look for.

  13. Steve V.B. says:

    -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.

  14. Eric N. says:

    Thanks Steve

  15. Bill says:

    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.

  16. AJ Kumar says:

    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 :)

  17. AE says:

    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.

    • But BoA is only paying taxes on its profits. If it operated at break-even by paying higher interest and/on deposits or charging lower rates on loans (and I’m not suggesting it should) it would pay $0 in taxes – the same as non-profit CUs.

      The higher loan rates and lower deposit rates are the CAUSE of the taxation, not the effect.

    • Lynn says:

      Since they are non-profit what’s unfair about it? Do you like paying higher rates on loans and making less on your savings? do it then, too me using a bank that is more interested in making money than in serving me is silly. You’d rather support BofA just so they can take 28.5% of the money they make to pay taxes with? Not with my money!

    • Anonymous says:

      Is not unfair, if you consider that every single member is the owner of that credit union. Any extra money comes back to you as a dividend. Do not think this is fair enough?

  18. Nancy V says:

    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.

  19. BaysoxFan39 says:

    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.

  20. hoht says:

    My dad got me started at a credit union, said it was WAY better than regular banks. And he was right, no stupid fees and hidden charges. And I could withdraw at most ATM’s without a transaction fee because my credit union is part of a credit union network. :D

  21. aua868s says:

    my credit union offers better rate than BoA but still falls way short than Ally Bank.

  22. javi says:

    I love my local credit union, they gave me the best rate for my car loan and are very competitive on CD rates.

  23. Anthony says:

    Great oldie, Jim. About this time last year, I switched to a credit union.

    For anyone who is thinking about making the switch, just do it! Open a CU account. When I initially opened mine, I only expected my CU to be “equal to” a commercial bank’s rates, service, etc. Today, I am glad I made the switch over.

    I do have two “make or break” complaints.

    1. Credit unions don’t tend to be nationally available. However, there are “Credit Union Service Centers,” which is a group of CU’s. Deposit money at any CU Service Center. (You’ll have to get loans and CC’s at your own CU though!)

    2. I am a big supporter of online services. However, my CU’s online banking interface is subpar.

  24. Yana says:

    I joined a credit union when my bank was sold to another big bank, a couple of years ago. I like having multiple financial institutions, and thought I’d keep my credit union account even though I was not impressed with the first problem I had – they held a check that I wrote from a bank across the parking lot for 22 days. They could have made a phone call, but told me I would have to go get proof that the check cleared for them. I don’t have time for that and didn’t need the money immediately, so just waited.

    A couple of months ago, I decided to use the account for daily debit card purchases. Because I shop for another person, I make multiple purchases, and it sometimes looks funny. A normal bank would call or freeze the card temporarily, but the credit union has a 3rd party 800 number call and demand your debit card number. I did not give it, but cleared up the problem. I was told it could happen again if I made multiple purchases. I do not like that. I quit using the debit card for daily purchases. Still thought I’d keep the account.

    Last month, when I was making a deposit, the teller asked me to raise the brim on my hat for security purposes. I didn’t mind and did so. One thing I really like about the credit union is that I don’t have to make up a deposit slip – just hand them the checks, and they add them up. Anyway, last time I went to make a deposit, someone working at a desk offered to help me since it was a straight deposit, and told me to take off my hat. I do not appreciate being told to get undressed in the bank. I wear hats often, and they make my hair flat. I suppose they use security cameras, and it was humiliating. I will be closing the account as soon as I empty it out for the most part, by writing checks. I prefer the big banks!

  25. lostAnnfound says:

    I started working at a CU 23 years ago and stayed there two years full time and then five years part time. Since I started that job my accounts have always been at the CU (except for my ING account). They offer everything from savings to IRAs, personal loans to mortgages and online bill paying. The personal service is really important to me. When I go into my local branch I know the tellers and they know me.


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