Special Report Thursday

A record number of Americans switched their accounts from banks to credit unions recently. Credit unions offer a number of benefits that may not be offered by banks, such as lower usage fees and improved customer relations.

 

While there may be a number of advantages of removing your money from the big banks, credit unions also have their own set of disadvantages. It is important to assess the pros and cons in order to determine the best choice for your banking needs.

 

 

Benefits of Using a Credit Union

1. Superior Customer Service
I absolutely abhor having to call my bank for assistance. After weaving my way through the voice-prompted options for several minutes, I can finally speak to a real person. Usually, the hold time at my bank is at least 10 minutes.

Credit unions offer real customer service, where you can speak to a live representative shortly after initiating your inquiry. You have peace of mind knowing that the credit union cares about your account.

 

2. Cheaper Interest Rates
You can get low interest rates for auto loans, mortgages, and personal loans at a credit union. You can receive interest rates at credit unions that are often at least one-half percent lower than bank interest rates. This translates into substantial savings over the life of the loan.

 

3.  Credit Unions Are Non-Profit
Major banks focus on making profits. Credit unions, on the other hand, are non-profit cooperatives that are owned by its members. They focus their energies on their customers, rather than a bottom line.

 

Disadvantages of Using a Credit Union

1. Lack of Services and Products
Major bank websites are typically more user-friendly than credit union websites. For example, some credit unions don’t offer online bill pay or online transfer options, and if you regularly use online banking to manage your accounts, this is a major disadvantage. And though assistance can be impersonal and more time-consuming, major banks often have large customer service departments that work outside of regular business hours.

 

Furthermore, credit unions do not offer the array of products found at major banks. Many credit unions don’t offer large business loans or cash back rewards credit cards. In addition, investment options may be limited.

 

2. Fewer Branches
Commercial banks have multiple branches in a variety of locations, and sometimes offer extended hours, allowing you more opportunities for in-person transactions. If you switch to a credit union, they may only have one local branch, and likely will not have extended hours.

 

3. Fees
If you currently enjoy free banking with a national bank, you might be disappointed to find that your credit union charges fees. For example, credit unions usually offer free ATM usage when you use credit union ATMs. But because credit unions have a limited number of branches, you may not find a credit union ATM when you need one, and ATM usage fees can quickly accrue.

 

Final Thoughts

Your national bank offers you conveniences not found with a credit union. However, even with the drawbacks presented here, the advantages of joining a credit union can outweigh the disadvantages.

 

In many cases, credit unions offer superior customer service, and they typically offer better interest rates. If you can save more money by switching to a credit union, then you should consider making this move. Change can be difficult, but if that change can save you money and provide peace of mind, go for it!

 

This is an article by David Bakke, a contributor for the Money Crashers personal finance blog, which features content related to money management, budgeting, banking, and investing.