By  Updated on Wed Nov 28, 2012

Should You Favor a Credit Union Over Your Current Bank?

 
Should You Favor a Credit Union Over Your Current Bank?

Marco Arment / flickr source

You may have accepted your bank for the last few years because nothing new has come up in your personal financial life. But if you have recently been to your local branch office to talk about getting a loan or have noticed a lot more fees on your latest statement, it may be time to consider moving on.

Many consumers forget to keep tabs on their bank and as a result they fail to realize the added fees and the lessening of services since new regulations were enforced by the federal government. As banks began to lose profits when the new laws changed the way they can collect fees, banks had little choice but to change the banking experience customers had come to rely on. There are rarely any banks advertising free checking accounts and no one is giving away complimentary toasters.

Taking the Blinders Off

If you have not previously considered how your bank has changed or what it is costing you, it is advisable to start paying attention. The bank has your money and it is your responsibility to know exactly what is happening to your cash. Start by reviewing your bank statements for the last several months and be sure to highlight the fees your accounts are costing you each month. Some banks are still pretty reasonable about these fees but some have really watered down their services while upping their fees — requiring more work to avoid them.

Start Looking Around

If you come to the unfortunate conclusion that your bank is no longer affordable for your financial situation, don’t delay in starting your homework. Go online and shop for better offers. Compare local community banks and other major banks to see what else is out there. Keep notes about trends you are seeing in the banking industry including interest rates, fees, and services other banks are offering their customers. Also check on the many special offers banks are putting out there to get your business. Not all may be appropriate or appealing to you but it can be an added incentive to make the switch.

Step Up and Negotiate

If you are dissatisfied with specific parts of your banking services, don’t give up without a fight. Schedule a meeting with your local branch bank manager to discuss the changes that have occurred and how they have affected your account and your money. Go in prepared to with a list of things you’d like to have back, fees you’d like to have waived, and whatever feedback you have based on your research. Banks are in business to make money. They like to keep the customers they have and will often be willing to work with you to keep you in their hands. While the manager may not meet all of your demands, they may be willing to work out a better deal. If they bank refuses to budge on your behalf, start getting serious about looking elsewhere.

Is a Credit Union Right for You?

There has been a lot of talk about people jumping ship in favor of a credit union. While there are certain advantages to moving your money to a credit union, a credit union may not be the right choice. Consider the differences and make a more informed decision:

  • Structure – The biggest difference between a credit union and a traditional bank is the way it is managed. Banks are financial institutions set up to make a profit and there are shareholders involved that also want to make a profit. Credit unions are non-profit entities and it is its members that run the show, which translates to credit unions focusing more on the customer than the profits.
  • Eligibility – Traditional banks accept all consumers’ business provided they do not have a poor banking history which can get them denied for a savings or checking account. With a credit union, you have to be associated with another organization that enables you to join the credit union, such as your employer, your occupation, where you live, or the like.
  • Membership – The majority of credit unions require a membership fee to join — which can be a one-time fee up to $20. Banks don’t have this particular fee but may require you to deposit a certain amount of money in order to open an account.
  • Rates – Credit unions are known for their higher-than-average interest rates on savings accounts and low interest rates on loans and mortgages. Banks have to consider their profit margins and typically have higher rates on loans and lower rates on deposit accounts. Online banks, however, tend to offer better savings rates.
  • Convenience – A consideration that many customers make when comparing credit unions to banks is the lack of convenience. Banks largely make it very easy to access your cash, bank services, and in-person tellers. There are ATMs and branches saturating many areas. Credit unions may only have one branch in the community, which may be less convenient for some customers.

Consider the Pros and the Cons

It may not always be easy to decipher where best to put your money. With so much information out there and advice galore about how to deal with your personal finances, ultimately the choice will always come back to you. Do your homework, ask family and friends for referrals, and decide where your money belongs.

Ultimately you want to feel confident in the decision you make because you have to live with it. Moving all of your money to a new location is not an easy thing to do, so it makes the most sense to be confident with your decision before moving forward. You also want to make sure you are happy with your new service provider. Schedule an appointment to speak in person with a bank manager and a credit union representative. While fees, rates and services do matter, customer satisfaction should also be a primary concern.

For more on the differences between banks and credit unions, check out this article and video.

Related
 
 

Post a Comment

  • danerfrawley

    A correction to the information stated above. Credit Unions do not charge a “fee” for you to open an account. The money that they ask you to deposit, is simply your “share” of the credit union. If they ask you to deposit $5, they will then explain that the $5 is your ownership share of the credit union and as long as you maintain the $5 in the account, you may keep your membership. That share gives you membership to the cooperative financial institution (credit union) and entitles you to the benefits of membership, including voting for the credit union’s volunteer board of directors. If you close your account, you get this money back in full, but you then lose your membership privileges. Each credit union’s membership share is different- normally raning from $5-$25, but each credit union charges the same amount to every member that joins. This way, every member has the same “share” amount or ownership stake in that particular credit union.

  • Andy

    Although credit unions do not typically have as many physical branches as the large banks, many offer the same access via online & mobile banking, and an ATM network that dwarfs the large banks. If you actually “need” a branch to conduct your transactions, then choose a financial institution with a branch near home or work. Otherwise, a credit union is an ideal option – their structure allows for better service and more attractive rates (they don’t have a huge branch network or shareholders to support).