There are a lot of questions surrounding if credit unions are better than banks. One of the problems with answering this question is that most of those asking don’t understand the difference between the two.
Credit unions have become more accessible and have a broader reach than they did in previous years, making them a viable option for spenders, savers, and borrowers. Here’s what you need to know about credit unions, and how they stack up against a bank.
What is a Credit Union?
A credit union is a non-profit organization, whereas a bank is for-profit. The benefit of the non-profit approach is that members can benefit from higher interest rates on their savings, as less money goes toward the business. Credit unions are very member-focused, and those who go there tend to feel as though they are treated more like a human than a walking wallet.
One of the differences with credit unions over banks is that to be a member there are certain requirements you must meet. This is different from being able to walk into a bank anywhere and open an account. The requirements of a credit union vary from institution to institution. They could require something as simple as a home address in the local area or be targeted toward workers in a certain industry. For example, Dane County Credit Union is a credit union in Madison, Wisconsin that services people in the surrounding areas, regardless of their job types. Industry-focused credit unions might be open only to teachers or family members of those who work for a corporation-owned credit union.
Where Credit Unions Beat Banks
A lot of people dislike using a bank because they feel as though they have to pay to access their money. They are also well aware of how profits work and are more mindful of the corruption in parts of the banking industry since the recession in 2008. For those people, it’s the idea that they are a member of an institution that has their best interests at heart that makes all the difference in a credit union.
There are financial benefits to being a part of a credit union as well. Credit unions don’t have the same shareholder obligations of big banks. As a result, interest rates are higher on savings accounts and lower on loans. Withdrawal and check fees may also be lower, depending on the institution.
Credit unions are often more flexible with their pre-requisites as well, as their customer-oriented approach is built to help you achieve your financial goals without any hidden agendas. The agreements and terms are often simple and straightforward, with no nasty surprises down the road.
Where Credit Unions Fall Short
The positives of using a credit union often far outweigh the negatives. There are, however, a few areas in which credit unions don’t have the same reach as banks. There are often fewer options for account types, which some will see as a negative. On the other hand, some clients will view this as a positive as they won’t get overwhelmed by choices.
Credit unions are notorious for their limited locations and ATMs, as well as their lackluster online services due to a smaller budget than big banks. This isn’t the case for all credit unions, especially as web programming becomes more accessible. It is, however, a consideration for those who travel frequently and require the convenience of banking on the go.
Are Credit Unions Better?
In many ways, the credit union experience is superior to using a bank. However, it all comes down to personal needs. If you travel a lot for work or numerous ATMs and streamlined online banking is a priority for you, you may opt for a bank over a credit union. Still, it’s worth seeing what your local credit union has to offer – they may be better suited for you than you would have thought.
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Our CU has branches all over the area, along with plenty of ATM’s. Haven’t used the ATM feature out of town, but I’m pretty sure they are interlinked now so virtually any ATM is accessible.
Their online site is FAR better than the bank we previously used. Their interest rate on standard saving account, while pitiful at 0.3%, is still three time the rate of our previous bank. And the CD rate is significantly better.
I can’t find any disadvantage to using this CU.
IMO, A consideration for those having access to a U.S. Govt. credit union: The bureaucracy will take care of its own, first.
In really hard times, I think govt. credit union members will be sustained better than others.
So, while I get better interest rate and other benefits from a private bank, I direct-deposit all my income to the credit union first, then transfer some of it to the bank.
However, my experience with customer service is the opposite of Andy’s. Credit union’s is inferior to the bank’s. Probably the pervasive “govt. syndrome”: nothing works really well there.
I’ve given up on brick and mortar banks. The fees are always ridiculous. I do almost all my banking online. But if I do need a local place I will use a credit union.
I have 3 accounts, 1 at a local credit union, 1 at a local bank, and 1 at a multinational bank. The local bank and the credit union are fairly similar in their convenience, low fee structure, and overall usability. The large multinational bank is by far inferior. They have huge fees, that are often charged in error, much higher minimum balances, and they take far longer to approve any financing. For me, the credit union is the best way to go, followed very closely by a locally owned and operated bank. The large multinational banks, in my opinion, aren’t very useful at all.
I love my credit union! I prefer credit unions because they tend to be smaller and know you personally. This can come in handy when you have an issue with your account that needs to be fixed, like a screw up with a deposit, or lack thereof!
We’re members of a local credit union AND a very large credit union elsewhere, and love them both. Both offer free ATM access over the USA and Canada thanks to the “CO-OP” network . Overseas, we have the VISA “PLUS” network for ATM use, for a minimal fee (usually $1). Thanks to direct deposit, the internet and ATMs, banking is super easy!
I have almost always opted for Credit Unions my entire adult life. First experience with a bank was when I first started working as a teen. It got bought out by another, larger bank. Have almost always had nothing but positive experiences with all of the credit unions I have belonged to. Have been with the current one for over 20 years. Only bad experience was earlier this year when a rep at the credit union tried to tell me I couldn’t take money out of my checking account and transfer it to my IRA! I had been doing just that for several years. Needless to say I spoke with a manager and got it straightened out right away.