Banks have gotten a bad rap over the last 7 years, due in part to the 2008 financial crisis. As a result, a lot of people are looking to alternatives, with credit unions being one of these. Pound for pound, credit unions seem to provide individuals with attractive incentives such as lower banking fees and higher rates. In addition, it’s estimated that there are more than 7,000 credit unions all over the country, serving millions of Americans. In this post, we’ll take a look at some of the advantages and disadvantages of credit unions in comparison to traditional banks.
A lot of us grudgingly accept to pay overdraft, checking and other types of fees that banks levy on us. We rationalize these payments, saying that the bank has to make money since it’s a for-profit institution and that it offers us unmatched convenience. However, credit unions have traditionally been known not to charge fees. This is because they tend to be smaller than banks, which essentially means that they keep their overhead costs low. These savings are then passed on to customers in the form of no transaction fees charged. It’s also estimated that more than 70 percent of all credit unions offer no-fee checking, while only about a third of banks do so. In this case, credit unions are a clear winner when it comes to all things fees.
Banks offer competitive interest rates to encourage us to save. However, their rates don’t come anywhere close to what credit unions offer. That being said, credit union interest rates have been traditionally known to offer lackluster rates that don’t do your money justice on a year-to-year basis. Expect a rate of about 0.14% for credit unions and 0.13% for banks.
Good service is at the heart of every successful banking service. People want to feel that their requests and needs are heard and attended to on a regular basis. Most banks usually cater to tens of thousands of clients which effectively stretches out their resources. You are unlikely to get a listening ear promptly if you decide to go the bank way. Credit unions, however, are the exact opposite given their size. This may change in the future, with banks scaling up their support systems in response to demand. That being said, credit unions take the cup when it comes to customer service for now.
While we would like to advocate that you consider credit unions, please be aware that you have to meet a certain eligibility criteria before being allowed to open an account with them. Some of these qualifications include having a certain form of employment, belonging to a specific religion or cultural affiliation or residential area. Make sure to ask exhaustive questions and check for any flexibility with regard to your choice of credit union so you can get in on the action. At the end of the day, carrying out adequate research and looking at your needs in their entirety will help you make the best decision going forward