Many people are fed up with the high fees from banks and have considered taking their business to credit unions. By switching, you can greatly reduce the amount of fees you pay on a monthly basis and even earn more interest on the money you have in your accounts. The estimate is about $300.00 more in your pocket a year. That’s a nice night out.
Even with this extra cash in one’s pocket, people still have questions on the differences between the institutions.
What Exactly Is A Credit Union?
Credit Unions were authorized by the Federal Credit Union Act of 1934 as a low-cost way to benefit and serve the personal financial needs of their members. By contrast, banks exist only to earn a profit for the owners.
Unlike a bank, which accepts deposits from anyone who wants to open an account, you must qualify to join a credit union, which is a private institution.
Do Credit Unions Provide The Same Services As Banks?
Yes. Services include everything from checking accounts and credit cards to auto loans and mortgages. Credit unions generally impose fewer and lower fees than banks and have lower balance requirements. They also pay better interest on savings accounts and charger lower interest rates on loans.
Example: Bank checking account fees typically amount to $100 to $150 per year for customers who have low balances. Credit union fees for similar accounts average half that amount. On top of that credit unions offer greater flexibility than other lenders. They are far more likely than banks to approve a borrower who can’t afford the standard down payment on a mortgage.
Are Deposits Insured, As They Are With Banks?
Credit Unions are insured by the National Credit Union Administration, not the Federal Deposit Insurance Corp. as banks are. Both agencies insure accounts up to $100,000 with the full faith and credit of the US government.
Are There Any Drawbacks To A Credit Union?
Not many. It might take a bit of time to find the right credit union because some don’t offer a full range of services that you may need. And you might not qualify for membership at the one you want. Another drawback is location, as credit unions don’t always have as many branches as banks, but most have ATM cards.
Some small credit unions won’t be able to make certain loans as large banks can. But unless you want to borrow millions of dollars, this shouldn’t be an issue for you.
How Can I Find A Credit Union?
Visit MyCreditUnion.Gov and click on your state and then enter your address and it will populate all the credit unions near you.
We suggest that you visit the websites or call 3-5 credit unions first to see if you qualify for membership. While some are restricted to narrow groups, such as the employees of a specific company or government group, others may require only that you live in the region. Virtually everyone will qualify for at least one or two local credit unions.
Next, determine if these provide the services you need, and compare their rates and fees. Ask for copies of their brochures for details of their programs so you can compare to others that you are considering.
If you don’t find a credit union in your region that meets your needs, consider doing business with one in another part of the country. If you do your banking by mail, the distance won’t matter. Banking through the mail may slow down your transactions by a few days, but that is a small price to pay for lower costs and better service.
Laura Bushnell is Editor in Chief for National Review Brand Foundation of Consumer Updates and based in Boston. Previously, she held senior VP level positions in corporate finance and consumer financial planning firms.