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The difference between bank and credit union customers

Credit union customers enjoy lower fees and overall better customer satisfaction.

By Smart Spending Editor Jul 1, 2013 7:53PM
This post is by Casey Bond of U.S. News & World Report.

MSN Money PartnerNov. 5, 2011, also known as Bank Transfer Day, marked a new era in banking. Fed up with excessive fees and poor customer service, customers at big banks quit putting up with the abuse and started taking a proactive role in their own finances -– moving their money to credit unions in droves. However, it seems the fiery passion for community banking has tempered to nothing more than a warm glow.

Image: Office workers © Jupiterimages, Brand X Pictures, Getty ImagesThere was no Bank Transfer Day in 2012. Kristen Christian, the day's creator, told media she didn't want to create a distraction from voting during a presidential election year. However, with a key piece of credit union legislation on the ballot in 2012, Bank Transfer Day could have been vital to reintroducing the voting public to the benefits of credit unions.

Could it really be the average consumer just doesn't care that much anymore? Erica Volpe of Money Federal Credit Union thinks so. "Our institution actually didn’t see much traffic from Bank Transfer Day," she says. "Credit unions had their 15 minutes of fame in 2011, but like all media blitzes, it faded with the next big story."

On the other hand, it may be the movement from big banks to credit unions has simply grown quieter. The Credit Union National Association reported earlier this year that after membership at not-for-profit financial institutions hit an all-time high in 2011, it did so again in 2012, with credit union membership surpassing 93 million in the second quarter of last year. "Once [bank customers] make the switch to a credit union, members never turn back," Volpe says.

Even so, no matter how many new members credit unions gain, the number of customers banks have remains exponentially higher. So, what type of institution do Americans truly prefer?

Banks vs. credit unions: a modern-day comparison
Regardless of preference, there are a number of advantages and drawbacks to each type of financial institution. These include:

Accessibility: According to the Federal Financial Institutions Examination Council, there are roughly 6,000 banks -– operating close to 100,000 branches and holding a total of $7.4 trillion in deposits. But due to numerous mergers, as well as the growing popularity of mobile and online banking, the number of physical branches is rapidly declining.

Unlike banks, according to The Financial Brand Credit Union Industry Outlook, the total number of credit union branches has grown -– increasing from 20,694 in 2007 to 21,433 in 2011 -– with only the largest credit unions adding branches. (The top 100 currently hold 14% of all branches.) Granted, this is still substantially lower than the total number of bank branches in existence.


To make up for this limited physical presence, many credit unions participate in ATM and branch-sharing networks that allow members to perform transactions at other credit union locations. The CO-OP ATM Network, for instance, provides credit union members access to more than 30,000 surcharge-free ATMs, some 5,000 branch locations and more than 2,000 self-service locations nationwide.

Fees:
Banks are notoriously associated with excessive fees, though a common misconception is credit unions are conversely fee-free. Credit unions also charge fees, although considerably fewer on average than banks.

A study last year by Consumer Reports compared average fees on common financial products and services between banks and credit unions and found credit union members (when charged) generally enjoy lower fees than bank customers. Here is a detailed comparison of credit union fees versus bank fees:

Average Fee

 

Banks

Credit Unions

Non-interest checking monthly fee

$10.27

$6.00

Online bill pay fee

$6.95

$0.00

Out-of-network ATM fee

$2.21

$1.07

ATM surcharge

$2.96

$2.79

Overdraft fee

$34.48

$27.82

Stop payment fee

$31.09

$19.43

Data: Consumer Reports, February 2012


Interest rates: Deposit interest rates today are low across the board. As such, no one is getting rich off the difference between a 0.12% annual percentage yield a credit union may offer on a savings account and 0.21% APY a bank may offer.

In terms of loans, the gap narrows: Credit unions tend to have slightly lower rates, though again, the disparity is minimal. Here is a sample of the Informa Research Services weekly rates snapshot for a more in-depth comparison:

 


Credit Union

Bank

Difference

 

0.43%

0.29%

0.14%

 

0.21%

0.12%

0.09%

 

0.33%

0.15%

0.18%

 

0.18%

0.10%

0.08%

 

 

Credit Union

Bank

Difference

 

10.48%

10.11%

0.37%

 

2.72%

3.93%

-1.21%

 

4.29%

4.46%

-0.17%

 

4.03%

3.99%

0.04%

 

2.87%

2.88%

-0.01%

Data: Informa Research Services, June 2013


Customer service: Despite seemingly deteriorating reputations, banks have in fact been gaining consumer confidence. According to the 2012 American Customer Satisfaction Index, banks scored a 77% customer satisfaction rate -– an increase of 2.7% over the previous year.

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Meanwhile, credit unions -– known for their outstanding customer service –- have fallen in ACSI rankings by 5.7% to a score of 82 as of 2012. Nonetheless, out of all banking services, credit unions remained rated better than banks.

More from U.S. News & World Report:
6Comments
Jul 2, 2013 6:57AM
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I will never do business with a bank again. Our credit union does not charge an overdraft fee for an occasional slip up. The only fee we have is the "stop check" charge. The service is great, and our credit union is "non profit", which is not mentioned in this article.
Jul 2, 2013 10:55PM
avatar

Been with credit union 13 years and Im never looking back,those damn too Big too fail banks shouldve fail.

 They can Kiss my assets cause they will never have me as a consumer!!!

Jul 2, 2013 10:00AM
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What diffrence does it make? If you don't over draft and shop around for no fee credit and checking accounts and shop around for cd, money market and savings rate who cares. I have found today there is no One place to shop for all your financial services.
avatar

If you like to pay excessive fees, stay with your bank. Just a hint, credit unions charge less for loans, and pay a higher rate on cd's. Don't be satisfied with the rates on bank rate.com. Do your own research for credit unions that have more consumer friendly rates. Our local credit union, until recently, was charging, less than two percent on new car loans. Why the difference in rates credit unions vs. banks?

Credit unions, do not have a worthless CEO, making multi million dollars.

Jul 3, 2013 6:46AM
avatar
I've done business with a couple of credit unions and they were no great shakes. Piddly differences with local banks.
Jul 2, 2013 11:55PM
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Credit unions are all fine and dandy when things go right, but when they go wrong the remedies are govt regulated unlike banks. One can sue a bank a lot easier than a credit union.


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