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Toby Talbot / AP file
Credit Union are growing in popularity as consumers look for alternatives to putting their money in banks.
Shopping for a new loan, or a savings or checking account? You have more options than you think. Banks are the main place people park their money or get their loans, but credit unions are growing in popularity as consumers thumb their noses at credit unions' big brother in the world of financial institutions.
According to a March 2012 survey of 5,000 consumers conducted by Pleasanton, Calif., market research firm Javelin Strategy & Research, 11 percent of respondents indicated they would switch their main financial institution during the year. For the first quarter of 2012, membership increased by 667,000, reports the National Association of Federal Credit Unions, an Arlington, Va., trade association.
Although credit unions are an alternative to banks, a decision to switch depends on what you want from your financial institution. For some consumers, low rates on loans and higher rates on savings accounts are all that matters. For others, it's all about convenience or accessibility.
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"Banks may offer a better opportunity if you need a more sophisticated lending product or investment product," said Gene Kirsch, senior financial analyst at Weiss Ratings, a ratings firm in Jupiter, Fla. "For everything else, you're best to shop around. Credit unions are very competitive."
One of the major differences between a bank and credit union is its corporate structure. Banks are for-profit institutions, which means they are in the business to make money, and they have shareholders to placate. Credit unions are nonprofit and are owned by the members of the credit union, which means their focus is on serving the members.
Banks are conflicted because they have to manage what's best for the customers with what's in the best interest of shareholders, said Alix Patterson, chief operating officer at Washington, D.C., research firm Callahan & Associates Inc.
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"Banks are designed to maximize shareholder value, which leads to different decisions than credit unions," she said.
In the past, the corporate makeup of a credit union or bank wouldn't matter to a consumer who simply wants the best rates, but that has changed in recent months. Fed up with the fees and seemingly bad behavior on the part of banks, consumers pulled money out of banks and into credit unions on Nov. 5, 2011, a date that has become known as "bank transfer day."
That one day demonstrated that consumers do care about more than simply rates, said Mark Schwanhausser, Javelin director of multichannel financial services.
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To join a credit union, you have to be part of a specific group, whether group members work for a certain employer, live in a particular town, or belong to a church or organization. On the other hand, banks are open to anyone.
"Anyone can walk in off the street and join a bank, but as far as a credit union you have to have some common bond to belong," Kirsch said.
Because you have to have some affiliation with the credit union, it means you may not be able to join the one you want. But it doesn't mean you can't become a customer of a credit union, as credit unions increasingly become region-specific rather than group-specific.
"Not everybody can join any credit union, but there's a credit union for everybody," said Patrick Keefe, a spokesman for the Washington, D.C., and Madison, Wis.-based Credit Union National Association.
Most credit unions charge a one-time membership fee to join, which runs from $5 to $20, Keefe said. Banks don't charge a one-time monthly service fee, but some require a minimum amount to open an account.
For people who care solely about savings, checking and loan rates, a credit union may make the most sense. On average, credit unions do better on those rates than banks do.
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"Credit unions can offer higher deposit rates and lower interest rates on loans than banks because they don't have to worry about profits," Kirsch said. "Profits at credit unions are plowed back in and returned to members in the form of dividend payments, lower fees or lower interest rates."
Still, while credit unions typically beat banks on rates, it's only on the advertised rates, said Keith Leggett, vice president and senior economist at Washington, D.C.-based trade association American Bankers Association. "Banks are willing to beat the credit union, but you do need to go in and ask," Leggett said.
Because the rates can vary from bank to bank and credit union to credit union, banking experts say it pays to shop around if the best rate is what you are after. Bankrate's comparison rate tool lets you check current rates at credit unions and banks on banking products across the country.
One of the knocks against credit unions is the lack of convenience. While some banks seem to have a branch on every corner, credit unions typically only have one or two branches. At the end of the day, the convenience and accessibility are what truly matter, said Schwanhausser.
On bank transfer day, credit unions succeeded in gaining new members, but many consumers didn't unplug from the giant banks altogether, Schwanhausser said. For many people, switching means changing their direct deposit, canceling their bill pay and giving up access to branches pretty much wherever they are.
"The main reason is consumers are looking for convenience. Yes, fees do matter, but they are not mad enough to switch," he said.
That's not to say credit unions aren't trying to catch up. While you'll never see a credit union branch on every street corner of a major city, there is a network of 24,000 ATMs across the country, and credit unions are starting to set up shop in places frequented by consumers, such as supermarkets or convenience stores.
"Credit unions deal with accessibility with shared networks and technology," Patterson said.
Leave a Comment:
I fired BofA years ago due to their fee-gouging. Last straw was a $3 fee. I went to a credit union after that ... and have never been happier with my banking experience.
I don't know why anyone puts their money in a major bank these days. When was the last time you needed to go inside?
I fired Chase due to its greedy big corporation practices and incompetence. My head still spins when I remember the hours and hours I spent on the phone trying to reach the right department (and getting cut off periodically) for my questions.
I'm much happier with my credit union and I'll never go back to a big bank.
My bank has free banking, no minimum, no fees. Totally free. I just have to buy my checks. Over draft up to $500 also free except when I use it. Then it's $33 per occurance. Free debit card. No charges for using it except at a 'foreign' atm. Then it's $1.
I think for a bank checking account it couldn't get any better unless they paid me interest. Not all banks are run by gangsters.
Bank: monthly fees, service fees, out-of-network ATM fees, fee implementation fees, etc.
My current credit union: no monthly fees, smaller service fees, out-of-network ATM fees are refunded, checking account earns interest.
I don't really see any situation where I would do business with a major bank again.
Yep CU is the way to go, unless your absolutely 100 percent on top of your money 24/7. I don't need to worry about sneaky fees or trickery, just straight forward policies. Not all banks play the hidden fee game but a lot do and they absolutely rely on those fees which tells you all you need to know.
I love my credit union! Oh the irony that BoA has ads on this article. A big LOL on that.
No monthly fees, no tricky overdraft fees (actually free overdraft protection), nationwide ATM network, and imagine this they actually give me interest on my money.
Those big corporate banks deserve to lose more people to credit unions. They got bailed out by our taxpayer money and when times are tough they lay a bunch of fees on us. Unbelievable corporate arrogance.
Unfortunately I live in a rural area with no access to a credit union or I'd drop my bank in a heartbeat!
I refinanced a mortgage with a local credit union. The interest rate was lower than any bank. After I saw the bonuses they were giving the big banksters, I said no more. I am not contributing to the lifestyles of the rich and famous.
Where I live there is almost as many credit unions as there is banks. All of them cooperate with their ATMs so I can a different credit union's ATM and not have to pay any fees. BECU is great!
I have been doing my "banking" with a credit union (Navy Federal) since 1986 and have never regretted it. They are great to do business with, pay higher interest rates than most banks and have very few fees. In fact, they will even refund a certain number of out of network ATM fees per month, so if I can not find one of their ATMs when I need to I can use any one that is part of the PLUS System, CO-OP, or any of the other networks they belong to and not worry about the outrageous fees the banks charge. Many credit unions are on the CO-OP network, so if you are a credit union member you can go to many other credit union ATMs without getting hit with the high fees. I have never regretted doing business with them. I had a case where my electronic transfer payment on my credit card did not go through and they even waived the late fees because it had never been an issue before. They did this simply based on my explaining what happened and asking if it could be done. The person I was talking to was able to go ahead and approve this without my having to go through eight different people and automated response system hell. Try finding a big bank that will do something like that. They have pretty much all of the services you get from a big bank but without all the big fees and hassles. I will probably stay with them for the rest of my life unless there is some major change.
I consider myself most fortunate to have a checking account with Park Federal
in Louisville Kentucky and, hopefully, soon a savings account. And it
is not business as usual there.
Consumers leaving a bank for a credit union because of excessive fees. The best regulation money can buy. Far better than anything congress could ever do.
Credit unions:
What's NOT to like about them?
Big New York banks don't care about off-the-street customers because they don't need us anymore. Not since they abolished the Glass-Steagall Act. The local bank is just a front to cover their real money maker - T-Bills.
Yep, they get a free dollar from the Federal Reserve and then lend it to the taxpayers at interest. PLUS, they amplify their returns via "fractional reserve lending". Its a perpetual free money machine. Why on earth would they lend to local communities when they get guaranteed returns from government debt?!
I use both a credit union and a large bank. Credit Unions are great for basic loans. Rates are low, I refinanced a mortgage and did very well. For checking and credit and the more complicated banking issues including commercial loans, trust and investment, loan swaps etc, the large banks have many more resources. And the security level associated with big banks as you travel and are exposed to identity theft is huge. Somebody got my credit card number a few years ago and used it in Canada. The bank called immediately and it didn't cost me a thing.
In addition the oversight over large banks, including practices and liquidity ratios, is intense. The Tier 1 ratios of the largest banks like Chase and B of A are the strongest they have been.
Fees can be annoying but don't be penny wise and pound foolish. (Sorry, that saying sounds 100 years old).
If your financial circumstances are basic use Credit Unions. If they are complex, use a combination of a credit union and large bank. Small banks are a big risk, lots of hand holding and no infrastructure.
BoA is notorious for nickel-and-diming consumers to death. Even though BoA was founded in California, Californians hated the sleazy, thieving crooked bank. With drawing massive amount of deposit from their accounts, Californians essentially kicked out BoA as the number one bank in the state over a decade ago. BoA even had to sell its Frisco HQ and merged with a North Caroline bank to survive. Californians are happier and wealthier with less BoA presence in the state.
WallStFatCat
I us a B of A Credit Card, I spend about $5000 a month on it. I pay the full amount each month pay no interest and no fee. Every six months I cash in points and get a nice check for $330 ($300 plus a 10% bonus). Once someone compromised my card and used it in another country. B of A called me immediately, canceled the card and Fedexed a new card in 3 days. Cost me nothing.
Your experience may have been bad , not mine.
On the other hand, I had an account at a small bank, drove up to make a withdrawal one morning, it had shut down for 2 days while the new owner were resigning the place. They screwed up my account for 2 months.
Never did a credit union, not much of a choice where I am. I have heard good things but I don't know who insures them, who watches them, and who is really profiting from them. I do know I can buy stock in any publicly traded bank and join in the profits, I actually bought Bank America on January 2 this year and made a boat load of money. You could have too, anyone could have.
We have belonged to our credit union for 40 years. We would never bank else where. We know who runs it, who has our money, and where are money is invested at all times.
Taxpayers had bailout the WallSt bankers to the tune of at least one trillion dollars. FDIC, the government insurance company covering the WallSt bankers, had already paid out $800 billion of taxpayer money since the financial meltdown of 2008.
State credit unions buy private insurance rather than relying on the taxpayer as the insurance company. Consequently, the private insurance companies scrutinize the credit unions' books more carefully than the FDIC officials who care little about losing taxpayer's money.
It is high time WallSt bankers are forced to buy private insurance rather than depending on taxpayers as the back-stop.
It wasn't the credit unions that nearly brought our country into a depression...it was the banks! That alone should make you want to move your money to a credit union.
It would seem you forgot about the credit union collapse in 1992. Remember 'it's the economy stupid'. Well stupid, it wasn't the economy, it was the credit unions. Caused a two quarter recession. Of course by October 92 it was all over. But no one bothered to tell the voters.
Oh, and the tax payers bailed them out too.
Can't find anything about this on the web.
I think Pullmyfinger is thinking of the Savings and Loan scandal not the credit unions. Look up Lincoln savings and loan and the Keating Five but they started to decline also because of the real estate market. Another reason why I would never vote for McCain in the last election. Funny how certain things get sweep under the rug. I worked for Lincoln Savings and Loan when things blew up. You might remember Keating was also the guy trying to put Larry Flynt out of business while he was looting his customers.
Joker69:
FSLIC is like FDIC in that they both allow the bankers to shift the risk onto the taxpayers. The Saving-and-Loan scandal came about when lobbyists 'persuaded' corrupt politicians to pass new legislations allowing the once-upon-a-time "Thrift Institution" to own real estate, operate credit card business, offer checking accounts, buy business franchises, and make risky bets on investments. The catastrophe was just waiting to happen. Despite government lies, we now know that Lincoln S&L, American S&L, World's S&L, and few other smaller S&L were all feeding off the taxpayers. The government created the moral hazard and FSLIC went bankrupt as a result. And the taxpayers is left holding the bag.
Like the Federal government's policy and legislation that encouraged moral hazard and the looting of FSLIC, the same kind of government actions caused the bankruptcy of Fannie, Freddie, FHA, and FDIC. Neither the Federal government nor the taxpayers has learnt from history. Apparently, either the crooks and thieves have conquered Congress or the American people are kept ignorant by government propaganda.
Credit Unions in San Diego are strong players here. The major banks service businesses, but many of the credit unions have multiple, convenient locations. Mine has 26 locations and I can't recall what group I had to be with in order to join it. I think, alive.
Oh, by the way, if you are even related to any member of the US armed forces or the DOD you are eligible to join Navy Federal Credit Union which here in California was paying 3% on 6-year CDs a week or two ago. Try getting that with any major bank! these are the funds that get turned around into car purchases, home loans and in some large credit unions, mortgages.
I'm with Navy Federal and only have one inconvenience--it takes several days after I make a check deposit before the money is available. This is because I can't go directly to a branch or a Navy Federal ATM (there are none in the area) and have to use one of the ATMs in the CO-OP. As a result, I've had to re-join the bank that I got away from last year; I need to deposit money and be able to direct it out again as soon as possible in order to pay bills. But I am less than happy with having to do this. Already, they lost a $180 deposit that I made and which I had to file a claim for (mercifully, I did this in a branch and I had my receipt from the teller!), and I've somehow got to use my debit card ten times per month in order to avoid a $10 monthly fee.
Yep... those 'commi-style' credit unions are growing by treating their members fairly while the capitalist banks are shrinking by taking everything they can.
That's not how its supposed to work, right?
Actually socialist... but the RWNJs won't be able to discern the difference LOL.
Yeah, what a concept. Look out for your customers rather than trying to line the shareholders pockets with hidden and/or punative fees, ever-changing account rules and 'policies'. Do be aware that some CUs are better than others, so don't just rush off to the first one you see. Some of the really large ones aren't much different from banks, so do look around. I know when I call mine, I get a real live human, not some automated voicemail hell that takes five minutes to get to a human (if you ever do). They even know who I am....
Crazy Steve-1996926 - Yep... actually I've been using credit unions (Miramar Federal and USAA) for about 30 years... ever since BofA screwed me when I was a kid (there fees completely drained my first account that I had spent all summer working and saving for).
USAA is not a credit union David9000.
PatsFan4Life - ugh... brainfart. First Tech CU (USAA is just another great company)
I can see the day when the Credit Unions will have much more clout over the banks. It will be when folks finally have had enough of the extra hidden fees,extremely unreasonable interest charges, refusal to refinance loans, huge bailouts taxpayers will continue to be paying out, and dismal returns on their investments.
Banks really think customers are dummies and will suck them dry of every cent they can get. I see the Credit Unions filling a critical need for Americans to start taking back more control over their finances and paying out less to corporate greed.While so far, everyone I have ever used even threw in extra accidental life insurance with each account, go figure!
Refusal to refiance loans depends on you and your ability to repay the new terms of the loan; not whether or not you to a credit union or a bank.
If a credit union has a large amount of money it can lend, it may loosen it's approval guidelines. If it is short on money to lend, it may tighten it's approval guidelines.
As far as "throwing in" extra accidental life insurance with each account, you do actually pay for it in the form of legal kickbacks or soft dollar transactions between the insurance carrier and the bank, higher interest fees on loans, and less in dividends.
Credit card rate with Chase 15%, Rate with credit union 6.75%. Enough said. Good bye you corrupt banks who wish to foreclose homes on soldiers. I will NEVER go back to the big banks. NEVER!
I have used a credit union since about 2000. Never been sorry to have left the big corporate banks. Anywhere there is a credit union cash machine, and there are plenty, I can take care of my business. I use direct deposit, online bill pay and other online features, so location is not a problem. That lack of convenience argument is so last decade. When I need a loan, I know that I can talk to someone that knows me, who really listens, and who will give me the best rate. Just financed a new car (new to me) at 2.99%. I will never ever bank at the corporate banks again. ever.
My mortgage refinance just closed 2 weeks ago with my credit union.. rate is 30 yr fixed at 3.5%, no points. i get calls all the time from mortgage companies, i ask them if they can beat my current rate and they say "sorry, no"..
I have belonged to to credit union since 1978. What a blessing. Better loan rates and credit card interest rates. I LOVE my credit union. And they are all on shared networks, so i will always find a sister branch out-of-town where I can use an ATM, free of charge. You look this info up on your credit union website. :)
Then you must have experienced the credit union melt down in 1991-92. Tax payers had to bail them all out just like the banks. Guess they aren't so different afterall.
Can't find anything about this on the web.
You are confusing the old Savings & Loan Associations (for profit) with Credit Unions (not for profit). The Savings & Loan Associations had the melt down and were bailed out -- NOT Credit Unions. Please do your research -- Google "Decline of S&Ls"
You are confusing Savings & Loan Associations (for profit) with Credit Unions (not for profit). S&Ls were bailed out -- NOT Credit Unions. Google: "Decline of S&Ls"
I became tired of the fees and do not bounce a check--you will pay a $40 fee for bouncing it. I switched this year to a credit union and I am very pleased with the services they have to offer. Not corporate run; car loan rates that are below 2% and I am re-building my credit and have credit card now with a rate below 8%. I could not do this with a major bank; they are just a bunch of thieves that are robbing our people and our nation blind and we are letting do it to us.
Isn't it sick? And think, if we didn't pay for their bailout with our money during the crisis they wouldn't even exist any more. The nerve of them to take even more in the form of hidden BS fees.
Joined my credit union in 1980. Kept my checking account at a bank as my credit union did not then offer a checking account. When they did I moved everythting to my credit union. I was paying at least $10 a month in fees at the bank. Credit union checking fees are 0000. It was a nobrainer.
The article explaining the differences between banks and credit unions failed to mention the largest differenct - one that community bankers have been trying to get changed for years unsuccessfully - credit unions pay NO federal income tax. So the playing field is not exactly level. So if banks have to pay 30-40% of every dollar of profit in taxes, and the credit union pays nothing, it's easy to see how their pricing could be different.
"Level the playing field" - let the credit unions pay taxes, too, and see how competitive they remain!
DUH... credit unions are tax exempt because they're NON-PROFIT and owned by the members.
I believe that most credit unions are non-profit. All income over expenses are returned as dividends to the owner/members. Thus the playing field is level.
LOL... Yep, a 40% tax on zero is still zero. But if the banks had their way, they'd figure out a way to tax something to 'level' the playing field.
Some more of that republican math... the same stuff they used for their tax plan and to predict the GOP landslide... LOL!
Businesses don't pay taxes anyway, they are always passed to the consumer. Hence, your fees at your bank,
Unfortunately many credit unions have followed the same policies as banks - cashing the big checks first instead of in chronological order, expensive fees on minor overdrafts etc.
Yep... Navy Federal ( which is probably one of the largest CUs in the country now) may as well be a bank. Their fees are frigging outrageous and they pull the same exact things banks do as far as overdrafts ,etc. VyStar isn't much better. The OD fees used to be like $10...now they're $32 ! So when they let a check go through TWICe... you get charged $64 and then whoever you wrote the check or made the CC pmt to also gives you a double whammy. You can end up spending as much as $128 just for being as little as a penny short ! We need a law that limits OD fees to a percentage of the actual OD.. like 3%.
Wow. I must have missed this "meltdown" of credit unions that happened 20 years ago. Can't find a reference to it on Google either.
I've been a member of one credit union since 1974, another since 1981 and a third since 2008. They've always given me the best rates and most convenience. Heck - I was able to withdraw money IN EUROPE with my ATM card *without* incurring a withdrawal fee. You can't even do that in your own state with a bank unless it's an ATM that belongs to that bank.
Two things about the article though - there isn't a fee to join, just an initial deposit to make. Close the account and you get that back. Also, it's been my experience that you don't need to belong to an association anymore. Just walk in and you can open an account.
Banks are highly regulated and must spend large sums to comply with those regulations. Credit unions get a pass from the feds, which helps them tremendously.
Ask the officers of a credit union backed by the NCUA if there are no regulations.
And 'highly regulated'? Then why this recession?
Wilfred from Idaho... I am the Compliance Officer for a Credit Union. We have to comply with the same federal regulations as a bank. We get no pass. We follow the same FINCen guidelines as the banks. The banks are in so much trouble mainly because of their mortgage lending practices. Very few credit unions dabbled in any type of sub-prime lending.
I worked at Chase for years, and left about 10 years ago because it felt like I was selling my soul to make a buck. I chose lower pay, but peace of mind and a family friendly environment, which credit unions provide.
Banks do their lending usually based on credit score and income alone. While credit score will determine your rate at a credit union, we engage in a lending practice which takes into account "character." That means that if you have a good pay history on your "voluntary debts" (i.e. mortgage, auto, credit cards), but maybe medical collections dragging down your score, you are not automatically disqualified from aquiring a loan. We will also take into account your history with the credit union. This makes a HUGE difference in loss ratios. We have far fewer charge-offs than a bank because when people feel like they are really being given a chance, with a fair rate, in spite of credit blemishes, they are much more unlikely to default on their loans.
As far as accessibility, which this article does not do a good job of explaining, we have what is called a "Shared Branch" system. The large bulk of credit unions across the country partner with each other to make banking more accessible for our members. A credit union member can conduct basic transactions (deposits, withdrawals, loan payments) at most any credit union across the country, and they can also use almost any credit union ATM free of charge.
the 92 financial meltdown was not credit unions but the savings and loan banks. As far as I know no credit union has vere failed.
Unfortunately some credit unions have failed. Google 'Credit Union Failures'
Banks no longer want low net worth individuals who maintain small account balances. They lose money on them.
The big banks are shifting their focus to higher net worth individuals by establishing private client status programs for those who maintain higher total account balances. They do not want more checking accounts, low interest rate mortgages, etc., what they are doing is setting up investing platforms using techniques similar to what hedge funds do for their high net worth clients.
Wealth Management is where the big banks are going. If all you use your bank for is checking accounts, savings accounts, credit cards and debit cards, you are doing the bank a huge favor by moving to a credit union. The big banks will gradually eliminate their branches in low and moderate income areas and focus their time and attention on more affluent communities. That also dramatically reduces their risk in terms of defaults on loans.
America & Americans are inherently more socialist than what they think and what they would like to believe. On the surface, competition is looked upon as great, while deep inside, this country would love to not to have to compete and instead get a layer of protectionism.
Now its coming down to banks vs credit unions. Its the same deal. Long live the private markets. Healthcare ? Can the govt plzz take care of me and give me health care ?
Internal contradictions like these are best discussed openly. Else it needs to nowhere.
The early ninety's financial problems were with the Savings and Loan banks not Credit unions. As far as I know no credit unions has ever failed.
I have been with a credit union for 22 years. Outstanding service and almost no fees.
My main banking option has always been a credit union for the very reasons mentioned in this article.
Banking at a Credit Union is the only thing that makes sense.
there are credit unions that are open to everyone and some dont charge joining fees all I did was goggle credit union open to everyone and I got a list of credit union check it out