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)

{ 46 comments, please add your thoughts now! }

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46 Responses to “10 Reasons Why Credit Unions Kick Ass”

  1. CK says:

    I like our credit union but it doesn’t have nearly as many ATMs or locations as our bank.

  2. aua868s says:

    my credit union has one right at my cafeteria…saves me a run to the bank in the cold in the event of a need for cash!

  3. zapeta says:

    I use a credit union as my primary financial institution. The service is great and so are the interest rates.

  4. Lynn says:

    My dad was a VP of BofA back when they were California only … he hated CU’s. CU’s have been my primary financial institutions for 20+ years. Our latest mortgage (1 month ago) rate was 4.25% … banks just can’t touch that!

    Mutual Security FCU (CT)
    Hudson Valley FCU (NY)
    New England FCU (VT)

  5. daenyll says:

    My former CU, Teachers Credit Union (IN) acted more like a bank at times. They’d once had great rates but in the last couple years they were less competitive than the regional banks. I primarily used my accounts for transferring money to online accounts since I moved out of state for college and graduate school. I finally called it quits when I aged out of the student checking and they started charging me a maintenance fee without telling me until they’d drawn down the account and I got notice of a negative balance and a penalty fee.

  6. Izalot says:

    I love my credit union. There’s a sub branch within my place of work. People are frendly and not pushy. Rates for my home were obtained at 4.75%. I’ve never had a fee attributed for insufficient funds or other crazy things. I agree I’ve has over 20 years on the credit union train and I have no problem with them.

  7. Credit unions are great, but I always seem to stick to use commercial banks for the convenience.

  8. jsbrendog says:

    i’ve been considering making the switch to alocal credit union but just can’t do it. They are a little too far from my house, while there is a chase within walking distance, and there are too few atm options to avoid fees especially since i work and play in the big city (where there is a chasse or duane reade on every corner, literally)

    maybe one day…maybe one day….

    • jsbrendog says:

      ps, surprisingly, and i know i am in the vast minority here, I never had a problem with and loved WaMu and so far (knock on wood) haven’t had any problems with chase. in fact, the only one i did have they were super nice about and tok care of. granted it was frustrating because of the glitch and beauracracy but they did what they could in the branch i went to

  9. Shock says:

    We’re planning on opening a CU account at our local county CU to pay our daycare expenses. The headquarters branch is a block from our house. They have online banking. I’m going to keep my BofA accounts open though. Why not? I get the benefits of both.

  10. Chris says:

    My credit union has always taken good care of me. While the deposit rates seemed lower, so too were the loan rates.

  11. David says:

    My credit union was ok but issues which disturb me are:
    1. Provisional credit from fraud possibly aldi skimming victim. may have to pay it back if aldi doesn’t do the right thing or if the detectives can’t solve the case. Or since the skimmers got my pin.
    2. Was paying after services rendered and found it was declined plenty of funds. Another credit union member informed me she also found out the credit union computer system for debit or credit was down. Luckily I had some cash no warning ahead of time. Bigger banks tend to do this via email or text.
    3. Since the skimming incident they’ve ordered a new debit card for me. Wow still after 14 days not banking still don’t have it. Some banks told me they can overnight them.

    After skimming found the person over the accounts to be very rude and wanting money reimbursed. You ask about your debit card and he interupts etc. Lousy customer service skills.

  12. Ronster says:

    Dude my bank sucks, but my credit union kicks soo much ass. I salute you credit union.

  13. mannymacho says:

    I think that #10 on this list is the most important going into the future. Now that banks have proven they can take massive risks and simply be bailed out when things go wrong, (smaller banks too must take these risks to stay competitive), the only way to stop the madness is to speak with your deposits.

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