The Advantages of Switching to a Credit Union
Fed up with high bank fees? You’ll get a better deal at a credit union!
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. Each member has one vote, regardless of how much money they’ve deposited in the credit union, or how much they’ve borrowed – which makes the credit union a uniquely democratic institution. 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. This means that instead of working to maximize profits, a credit union’s management can focus on giving all its members the best possible deal. 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. You’re also less likely to pay for ATM withdrawals, checks or electronic banking if you’re with a credit union, plus you receive a slightly higher interest rate on your money. These factors combined are likely to net you a decent chunk of change every month.
If you get a mortgage, auto loan or other loan from a credit union, you’ll benefit from a very competitive interest rate, which can save you thousands of dollars over the life of the loan. For instance, the current average rate on a 48-month car loan from a credit union is 5.15 percent, while one from a bank might have a rate of 6.34 percent. Similarly, if you obtain a one-year adjustable rate mortgage from a bank, you’ll typically pay 4.73 percent – but get one from a credit union instead, and the rate could be 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.
It’s easier to get a loan from a credit union
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. So if you have a reasonable credit history and FICO score, a credit union could be your best bet if you’re seeking a loan.
Who can 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. Actually, these days anyone can find a credit union that will accept them. You do need to have a common bond with other members, but membership rules are often a lot more relaxed now, and many credit unions are open to entire communities or occupations.
There are several online resources where you can find out more about credit unions and locate one that will accept you as a member. You too can benefit from moving your deposits, loans and other financial products to a credit union today!