Is a Credit Union Right For You? – Bigger Isn’t Always Better
With all the negative press that big banks are getting these days, a lot of people have started to wonder whether a credit union would be a better bet. The answer to that question depends a lot on your specific circumstances and what you are hoping to get out of a banking experience.
What is a Credit Union?Credit unions are non-profit, member-owned financial organizations. Their primary objectives are to serve members best rather than to maximize profits. Members can borrow money at lower rates and often have access to fee-free productions, like no-fee checking accounts. In most cases, you need to be a member of a specific organization to join one. They can be a boon to people going through the credit repair process, as they are often more likely to approve someone for an account than for-profit banks.
The Perks of Dealing with Credit UnionsThere’s a lot on the plus side of dealing with a credit union instead of a bank, including:
- Lower interest rates. During your home purchase process, check out rates for mortgage loans at a credit union. Often you will find that they are lower than those at banks.
- Better service. Most credit union members report much higher rates of satisfaction then customers with similar accounts at big banks do.
- Lower fees. While zero-fee checking is an endangered species at regular banks, most credit unions still do their best to offer it.
- More likely to approve you for financial products. Since credit union membership is often based on group membership, they are more open to providing credit cards and loans to members.
The Drawbacks of Credit UnionsBut, there can be some downsides to doing all your banking at a credit union:
- Fewer branches. This can mean that getting to a physical branch is less convenient. People who deal with a lot of cash, such as servers or bartenders, might find it less convenient to make deposits if the closest branch of their credit union is too far away.
- Fewer services. Credit unions often lag behind their big bank rivals in features such as mobile banking or online bill payment. If you are considering a credit union, ask what features come with the account.
- Lower perks. If you are looking for reward credit cards, you may be better off looking for one from a big bank. When Bankrate recently rated the top 50 credit cards that offered cash-back or other rewards, only five were ones offered by credit unions instead of banks.
- Membership requirements. While there are many credit unions open to the public, many others have limitations on who can join. Some only take members of certain professions, while others are limited to alumni of certain schools or people who work for a specific employer.