Credit unions are no longer exclusive clubs. Now, just about anyone can join. They are attracting more members looking for ways to save money on banking and borrowing.
It’s easy to confuse credit unions with banks. They offer many of the same services and, from the street, their operations look similar. But peek under the hood, and you’ll find major distinctions. Depending on your needs, moving to a credit union could save you some serious money.
What’s a credit union, what’s a bank?
Let’s start with what credit unions aren’t. They’re not banks. Banks have important roles. Their massive funding provides liquidity and lending capacity that keeps the economy going. But they exist to make money for their shareholders, and they need to charge enough for products and services to cover expenses and make a profit. For consumers, maybe the best way to make money from a bank is to buy its stock.
Banks and credit unions come in all shapes, sizes and flavors. Not all banks are a bad deal for consumers, and not all credit unions are the best choice. (Read Is it Time to Divorce Your Bank?).
Banks typically offer at least a distinct advantage in two areas:
Whiz-bang technology. Banks’ size and wealth lets them invest in the latest technology, which, depending on your institution, can mean more-robust online banking or mobile banking offerings. Credit unions are catching up but, generally, they lag in technology.
Credit card rewards. Credit unions excel at offering lower APRs on card balances. Credit cards issued by credit unions, however, rarely top lists of cards best for rewards. Banks and retailers often have better deals.
But if you are looking to save money, borrow at lower rates and enjoy personal service, a credit union may be the best bet for you. Here are 12 areas where credit unions really shine:
1. Better service
Credit unions are cooperatives, owned and operated by members. That means they emphasize consumer value and customer service.
In 2014, three major consumer surveys (The Harris Poll, the Chicago Booth Kellogg School Financial Index and The American Customer Satisfaction Index) found that customers trusted credit unions more than banks.
Says the American Customer Satisfaction Index:
For a second year, credit union members feel that they receive better service and more competitive interest rates than consumers who have accounts or personal loans through retail banks. ACSI’s annual study on financial services shows banks down 2.6 percent for customer satisfaction to score 76 on a 100-point scale.
Credit unions enjoyed a rating of 85 points (of 100) from the survey.