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9 reasons credit unions are better than banks

Credit unions exist to serve their members. What big bank can say that?

By MSN Money Partner Feb 12, 2014 3:23PM

This post comes from Allison Martin at partner site Money Talks News.

Money Talks News on MSN MoneyWhile out and about, you may have passed by the local credit union without looking twice because you don't have a need for their services. Well, at least that’s what you thought.

Bank Vault © Radius Images, JupiterimagesWhich brings me to the following question: Are you aware of how credit unions operate and what they entail? If so, you may be inclined to open up an account at one closest to you or even make the switch from your bank.

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

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 be also 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 my credit union 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 boy 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.

4. Loan rates

Every loan I've ever gotten has been from the credit union, even after shopping around at the big boy banks. They usually have better rates because they are nonprofit and aren't looking to make their wallets fatter. According to the the National Credit Union Association (.pdf file), as of Sept. 30, the average interest rate on a 48-month new-car loan was only 2.91 percent at the credit union, but 4.21 percent with major banks.

5. Credit card offers

The NCUA also indicated that the average interest rate for credit cards was 10.99 percent for credit unions and 11.82 for banks. So there isn't much of a variance in terms of APR, but the plastic from credit unions are usually less costly in terms of fees.

6. Borrowing

Been turned down by all the major banks? Try your local credit union, as its borrowing standards are more flexible and they may be willing to work with you, especially if you are a member in good standing. And if you're self-employed, you already understand how tough it can be to get approved for anything with major banks.

7. Earnings on savings accounts

Although the interest rate is still on the low side, it beats the major financial institutions. According to the NCUA, as of Sept. 30, credit union savings accounts yielded earnings of 0.15 percent on average while banks earned only 0.06.

8. Customer service

The credit union may not have a 24/7 customer service line for you to call at 2 a.m. when you have a burning question about your account, but rest assured that the focus will always be on you. Every credit union I've ever been a member of was staffed by friendly representatives who knew me by name. I can't say I've had that experience with banks.

Also, there's no need to worry if your card is lost or stolen because there is typically an after-hours hotline you can call at any time to report these unfortunate occurrences.

9. Insurance

You can rest assured that your funds are safe in the credit union's hands. Similar to most major banks, all accounts are federally insured up to $250,000 and backed by the U.S. government.

What if I want in?

Credit unions usually serve individuals affiliated with a particular organization or geographic region. But this doesn't necessarily mean you won't be able to slip through the cracks. To search for a credit union in your area, take a look at:

Also, it wouldn't hurt to take a glance at Kiplinger's article on credit unions with unrestricted membership.

Of course, the terms, conditions and fees vary by financial institution, so you'll need to inquire about specifics.

Do you prefer credit unions over banks?

More on Money Talks News:

Feb 13, 2014 12:43PM
After putting up with the stupid fees assessed by banks like Wells Fargo and Chase I really wish I had joined my local credit union sooner. They gave me a good deal on my car loan, NO fees for checking and did I mention that I am no longer giving my business to one of those giant, fee-charging vulture banks anymore?
Feb 15, 2014 9:47AM

I gave up on commercial banks almost 15 years ago.  I would go inside to the bank to cash and deposit my paycheck and I would get a snotty, "You should be using the ATM" from the teller who felt that she was being bothered by my presence.  This was at a time when banks were merging at what seemed to be every other week.  I had a N.O.W. checking account that required a $1,000 minimum balance to earn interest and I was okay with that.  After the bank had been bought up by one of the out of state monster banks, I opened up my monthly statement to find a $22 service charge.  When I called the 800 number I spoke to a phone rep thousands of miles away who told me that I did not read the fine print and that I needed to have $25,000 in my account to gain interest or face a service charge..  Who on Earth has that kind of money in their checking account?

My credit union has a sign above the door as you enter that says, "YOU own this place."  That sums it up for me!

Feb 13, 2014 10:01AM
I've been beating the drum for credit unions ever since M&T's piling on of nickel-and-dime fees finally reached the last straw when they charged me for checks.

I discovered some things this good article doesn't clarify:

1. Most credit unions are open to virtually everyone, even if they have names like "State Employees Credit Union," (SECU) - a choice, by the way, which ensures a lot of branches throughout the state.  Sometimes you're qualified to join if a relative is a member at the time you join or if you attended a public college or community college in the state, etc.

2. At most credit unions, if you overdraw your checking account, there is NO fee or a small, perhaps $3, fee if savings can cover it.

3. At most credit unions, debit cards have NO swipe fees and can be used with NO fees at tens of thousands of ATM's nationwide.  Mine from SECU of Maryland, can be used with no fees at over 70,000 ATM's nationwide, including those in every Costco, Target and at 5,500 7-11's.  I use my debit card at stores like Aldi that don't accept credit cards.

Feb 15, 2014 10:04AM
I have been a member of Credit unions with both banking, savings and Credit accounts for over 40 years and have never felt the need to do business with a bank... A lot of the Credit Unions also offer special benefits for members as well.
Feb 15, 2014 9:47AM
I use my credit union for my mortgage because they keep it in house, and i don't need to worry about my mortgage getting sold.  also with lower fees, and better rates, I save tons in interest, which allows me to pay it off faster.
Feb 15, 2014 10:48AM
Gave up on my last bank 20 years ago, and have been well pleased with my credit union.
Feb 15, 2014 11:40AM

Credit Unions do not pay income tax because they earn no income.  A not-for-profit organization may earn money to pay it's employees and it's debts, but must return all other money to it's members.  Banks do not return excess money to their customers, but rather give it to their shareholders (sometimes) and also waste it on very high bonus and salaries to executives who do no real work.


I have worked for a credit union for over 38 years and we have never paid high salaries to our officers and never paid huge bonuses to them, either.  We are extremely connected to our members as well.  Sure, everybody makes a mistake now and again.  There are (former) members who have nothing good to say about us, but overall, we server our membership extremely well.  in 2013, we returned 12 million dollars to the membership as an extraordinary dividend!

Feb 15, 2014 10:41AM
I just refinanced my car with my credit union and saved $200 per mo. I'm thinking of refinancing my mortgage and getting away from BOA. I also have a teenager on this way to college and I plan to educate him on using CU services vs. big banks. They are much better! 
Feb 15, 2014 1:27PM
Credit Unions over Banks Any Day!!!!
Feb 15, 2014 11:59AM
I was able to open an account with a credit union with just five dollars while opening an account with major U.S. banks starts at $100 or 50 dollars.I support the small business,not the big,major ones like BoA,Wells Fargo,Chase,Comcast,AT&T and the list goes on.these major businesses are money grubbing who care more about the money than their don't have to use Comcast as your cable provider.there are small cable companies out there you can do business don't have to use AT&T as your phone service provider.there are small phone companies out there.Quit supporting these money grubbing companies, are just making them richer and richer with your support.   
Feb 15, 2014 2:22PM
1. I remember the year the Navy Fed. Credit Union interest rate on my account topped out at 16% interest. 

2. Recently,  within a few hours of some suspicious looking purchases, my credit union called me and asked if I had made the purchases. Credit unions are the greatest.

3. Some credit unions have shared branching. You don't have to be a member to withdraw or deposit at that specific CU. Ask them about shared branches. I wonder if banks have the same policy.
Feb 15, 2014 1:51PM
#1. You own the credit union you belong to!
Feb 15, 2014 4:45PM
Only fools use mega banks. Switched along time ago, after bad treatment by Wells Fargo Bank. Been super happy ever since.  
I tell you that I love my credit union.  I bought my son a truck and about a month later I bought myself a truck exactly like his but mine had more miles on it so I had to go to the bank for my financing. But his truck financed for 4.1%.  I have never had a rate that low but I have a decent rating.  Everyday it seems like something comes up but they are always there for me.  The big banks do tend to rip you off just because they can and do.  Credit cards will only give you 22.9% so what good are they??  They are not.  Like the article says they are in it for the money and nothing else.
Feb 15, 2014 2:33PM
They don't have to pay taxes like a bank, so less costs to run.
Feb 15, 2014 5:06PM
After years of searching for a financial institution that I would actually be happy with, (my formerly small locally owned and controlled bank was sold to M&I, which was sold to BMO Harris, a Canadian owned financial institution) I settled on a local Credit Union. I have been a member of my CU for the past four years, and I am completely satisfied with it, and with the choice I made to join a CU. As was pointed out in this article, big banks have fees and penalties for everything except using the restroom. That will be the next thing that they will attempt to charge a fee to use. The best thing about a Credit Union is that you are a member/owner. You have a say in how your CU operates. The worst thing about a big bank is that you are just another account number--nothing more. The big banks really don't care about you personally, all they care about is how much money they can make off of you. Since you are nothing more than an account number at a big bank, you have no say whatsoever in how your bank operates. Join a Credit Union in your community--I guarantee you won't be sorry that you moved away from a big bank!
Feb 15, 2014 6:13PM
After dealing with banks my whole adult life, I switched to a credit union about 3 years ago and haven't looked back. My banks always nickel and dime'd me to the extreme, I was always overdraft due to their "Charge and processing" policies. One of the banks I was with before going to the CU was actually successfully sued because of these policies.

I have NEVER been overdraft with my CU, and have enjoyed many benefits since joining. I'm waiting until I find a full time job, and I'm going to refinance my car with them.

Feb 15, 2014 11:24AM
is'nt it interesting that the main reason credit unions are cheaper is because they are non profit. just think at one time most hospitals in ths country were non profit as well as most insurance companies. many of the same posters who praise credit unions for being cheaper, rave about our for profit healthcare system. i find that interesting that the very same people want one form of business because it's cheaper and it's only cheaper because it's non profit yet they want a much bigger and much more expensive system to be all about profit
Feb 15, 2014 12:45PM
One bank I deal with and that's bmo harris, private bank, no hidden anything, fast great service, if you carry a c-card balance which we do not with them its 9.95% rate. no ceo taking millions in bonuses and laying off almost all the customer service people. Coravette
Feb 15, 2014 3:53PM
Politicians.....Banks, and the media; in that order are the biggest enemies of the sheep....but the sheep are too we continue askin' for loaned moneys.....
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