9 Reasons to Love Credit Unions (And Not Big Banks)

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While out and about, you may have passed by the local credit union without looking twice. You have no need for their services, right? Well, at least that’s what you thought.

Are you aware of how credit unions operate and what they entail? If so, you may be inclined to open an account at one close to you or even switch from your bank.

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What exactly is a credit union and why is it better?

MyCreditUnion.gov defines credit unions as “not-for-profit organizations that exist to serve their members rather than to maximize corporate profits.” They operate similarly to banks, as they make loans to members and accept deposits.

So, why should I choose the local credit union over big boy banks?

1. Motives

The sole purpose for a credit union’s existence means that it should have your best interests at heart and not the bottom line of the institution. Big banks, on the other hand, are there to turn a profit and will seemingly do whatever it takes to meet their numbers.

For more detail on ways that banks make money from their customers, read this article: “5 Sneaky Ways Banks Make Your Account Go Into the Red.”

2. Structure

Because they follow a cooperative structure, credit unions are owned and operated by their members. Upon making the initial deposit, you will be granted voting rights along with surplus income returned in the form of dividends because cooperatives are owned and operated by members.

As a member, you may also be able to conduct transactions at other affiliate locations outside of your institution. And some credit unions reimburse their members for ATM fees incurred outside of their machines. This was a major lifesaver when I arrived at college and discovered that one of the local credit unions near campus was partnered with the credit union I used in my hometown.

3. Fees

Credit unions have lower expenses, so they are able to pass on the savings to their members. For instance, many credit unions offer free checking accounts with no minimum balance constraints, but you will often have to pay a fee at the big banks if your funds fall below a certain number or you fail to meet other criteria. You likely will also be assessed a fee for each transaction that is processed using overdraft protection.

For more information on how overdraft protection can be deceptive, see: “Report: Big Banks Mislead Customers about Overdraft Protection.”

4. Loan rates

Every loan I’ve ever taken out has been from a credit union, even after shopping around at the big banks. They usually have better rates because they are nonprofit and aren’t looking to make their wallets fatter. According to the National Credit Union Association, as of June 27, 2014, the average interest rate on a 48-month new-car loan was 2.64 percent at the credit union, compared with 4.78 percent at major banks.

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Comments & discussion

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  • AnheuserBuschCU

    We have to agree with all of the above!

  • Toivo Kankkonen

    For over 50 years, I have belonged to one of the “big name” banks and have seen it all. Size means virtually nothing; except perhaps the bigger they are, the less chance you have to talk to a “real” person who can help you. Then I researched our local credit union three years ago and have been a very satisfied member ever since. They now have our joint personal accounts, my business account, our auto loan, our Visa cards, even our insurance and investments through affiliates. I couldn’t be happier! They know who we are by first name; they are the happiest employees I’ve seen in a long, long time, and they personally know the needs of the local community since they live right here. They have an online banking system that beats the socks off the big boys and I haven’t written a check in months. My only regret is that I didn’t find them sooner!

    • ron

      He is another advantage. At one time I worked for a company with layoffs. At a reg bank a loan has to be paid every month any extra money is taken off the back of the loan or you can put it in a 1% saving account while you are paying 6 % on your loan. My credit union BFG took the payments off the front so the months I was working I made double payments so when I got laid off the I would not have to make a payment for months because I was paid ahead. Best example I was doing much better and brought my kid a car put the loan in her name and got a three year loan. after the paper work was done I pd off the loan except for 100 dollars. so there were no payments due for three years built up my kids credit rating and only had to pay interest on 100 dollars till the end of the loan

  • grandmaguest

    Been a credit union member for over 40 years and would never go back to the “big boy” banks for all the reasons listed in the story and most of the reasons listed in the comments. Mine has a wonderful “free” on line banking and bill pay service and I have used it since they added these services years ago. I probably only write a check once or twice a year. I took my kids in when they were young and even the grandkids. They all have stayed with the credit union and even though one grandson has been gone in the military for couple of years, he still has accounts with them….they ask about him, and when he is home on leave, they know his name. It’s one big family….and we actually like each other!

  • Gary Masters

    Navy Federal is the largest in the USA and I think the best. I have a home mortgage, car loan and a bank account. Their bill paying service is great and when I pay I have records to prove I pay on time.

  • Gary Masters

    My mortgage was an ARM with Wells Fargo and I liked their site. But I like the Navy Federal CU page better. It even shows my spending patterns.

  • Nancy

    We left our “big name bank” (hereafter, referred to as BNB) for a credit union about 4 years ago. The BNB sent us a letter about adding new charges, so we knew the time was right for a switch. When we closed the BNB accounts, we were asked why we didn’t call or come in because something could be arranged–for example, because my husband’s social security is deposited directly, they would waive fees on the account. My question is, why didn’t the bank know this and not send us that letter in the first place? We are very happy with the credit union, which provides all the services we need. Online banking is adequate for our needs–my husband is able to monitor activity daily and move money between accounts as needed.

  • http://ecofrugality.blogspot.com/ Amy Livingston

    The biggest downside of credit unions is location, location, location. When we dumped our megabank eight years ago, I looked into local credit unions, but there were none within a mile and a half of our house, and I would rather not have to get in the car or make a one-hour round trip on foot every time I need to make a transaction. So we ended up with a smaller bank with about 75 branches across the state, and we have been quite satisfied. It has all the services provided by the big banks, including a great online banking site, but with much better rates, fees, and customer support.

    • Nancy

      Big Name Banks are closing branches, especially in middle and lower income areas, of course. And they gobble up community and regional banks like the Borg.