Is It Time to Consider a Credit Union?

by Miranda Marquit

Lately, there has been a lot of news about bank fees. Indeed, many consumers have become disappointed and annoyed with rising bank fees. As a result, consumers are looking around and wondering where else they can go to have a more pleasant (and cheaper) banking experience. For many, that has meant choosing a credit union.

In 2011, credit unions reached a record number of memberships in the U.S. A lot of this has had to do with efforts to encourage consumers to move their money from big banks charging fees to smaller financial institutions, such as credit unions.

Perceived Advantages of Credit Unions

Should you join a credit union?

Should you join a credit union?

Many consumers see perceived benefits in joining a credit union. For one thing, many credit unions still offer fee-free accounts. However, it’s important to realize that just because you are using a credit union it doesn’t mean that you won’t pay any fees. The local credit union I belong to recently announced that it is adding a monthly checking account fee. I don’t have a checking account there, so it doesn’t affect me, but it’s important to be on your toes, since there are some credit unions that charge account fees.

Another advantage cited by many is the favorable interest rates. In many cases, credit union members can get lower interest rates on car loans and home loans. It’s also possible in some cases to see lower interest rates on personal loans and credit cards. The lowest-interest credit card I have is the one from the credit union. However, some low-interest credit cards may not have rewards. Make sure you shop around before getting a loan. In many cases, the credit union will have the lowest rates, but it’s not guaranteed.

Credit unions also might offer higher yields on interest bearing accounts. You might be able to get better yields on CDs, money market accounts, and savings accounts than what you can find at a competing bank. Sometimes, though, the yields offered by online banks can be even better. Before you decide where to put your money, check online as well as with what is offered by your local credit union.

Things to Keep in Mind

It’s also important to address some of the perceived disadvantages of credit unions. First of all, credit unions, due to their nature, have membership requirements. Many of these requirements have been relaxed. USAA is a good example of a financial institution that has relaxed its previous membership requirements. Other credit unions have wide field of membership requirements that allow most people to join. However, make sure that you eligible before you try to open an account.

Another consideration is access. Because so many credit unions are local, it can be difficult to access your money when you go out of town. To remedy this situation, check to see if your credit union is a member of an ATM coop. When you belong to a credit union with a large ATM network, you can access your money fee-free. In some cases, the credit union coop will allow you to actually enter a branch and complete your banking transactions with a teller.

Finally, you want to make sure any credit union is covered by the National Credit Union Administration (NCUA), which is similar to FDIC insurance.

A credit union isn’t right for everyone, but it can be a good choice for many people. Carefully consider your options, and then choose a financial institution that works best for you.

Photo credit: NNECAPA

Published or updated July 5, 2012.
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