Switching banks can sometimes make sense, especially if you’re trying to pay less for banking services or get a better rate on a loan. With many banks hiking their fees to offset some of the losses associated with the economic slowdown, more Americans are turning to credit unions for their financial needs. These institutions, which operate on a not-for-profit basis, can offer some distinct advantages to their customers. If you’re looking for a new place to put your cash, here are a few reasons to give your local credit union a try.
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1. Fewer Fees
Big banks and small banks alike are based on a corporate structure, with shareholders receiving a sizable slice of the profit pie. Credit unions, on the other hand, are considered to be member-owned, which means they’re not responsible to shareholders. As a result, any profits are passed on to members in the form of lower fees.
When you’re comparing a particular bank to a credit union, pay close attention to the fee schedule. Typically, things like monthly maintenance fees, overdraft fees and minimum balance fees will be lower at the credit union. Credit unions also tend to be more flexible when it comes to reversing or waiving fees. For example, some will credit your account for foreign ATM fees up to a certain amount each month.
2. Better Interest Rates
Whether you’re shopping for a mortgage, car loan or line of credit, credit unions are a smart choice if you’re trying to score the best deal on interest. Once again, this is directly tied to their not-for-profit status. According to the National Credit Union Administration, the average rate for a three-year car loan in September 2013 was 2.78% for credit unions versus 4.18% for banks. Across the board, rates were lower on car loans, home equity loans and lines of credit, personal unsecured loans and credit cards.
In addition to offering lower loan rates, credit unions also tend to offer higher interest rates for savings accounts, money market accounts and certificates of deposit. For example, the average rate for a regular savings account was 0.15% at credit unions versus 0.06% for banks in September 2013. While it doesn’t seem like much, every penny counts when you’re trying to grow your savings.
3. Fewer Lending Restrictions
If you’re trying to score a loan from a big bank, you’ll likely have to overcome more obstacles than you would if you’re dealing with a credit union. For example, if you want to buy a car but you have bad credit there’s a good chance you’ll get turned down. Credit unions, however, tend to be more flexible in making loan decisions.
While the loan application process and the qualification requirements are typically the same, a credit union may be more willing to consider the bigger financial picture instead of focusing on a single factor. It’s even possible for nonmembers to qualify for a loan but you’ll have to join the credit union if you decide to take them up on their offer.
4. Personalized Service
One of the most appealing aspects of switching to a credit union is the opportunity to get personalized banking help and advice. The bigger the bank, the easier it is to get lost in the shuffle but credit unions pride themselves on the quality of customer service they provide. If, for instance, you’re having trouble making your loan payments you may find it easier to negotiate different repayment terms with a loan officer who’s familiar with your situation.
It’s also generally easier to get information about loans, services and financial products when you’re dealing with a credit union. Instead of jumping into the loan process blindly, loan officers are usually willing to walk you through the process step-by-step so you know what to expect. Since there are no profits at stake, you also don’t have to worry about getting hit with pushy sales tactics every time you walk in the door.
While there are lots of benefits to joining a credit union, there are a few potential drawbacks to consider. Not all credit unions offer online or mobile banking services which may be a deal-breaker if you need to be able to manage your accounts on the go. Convenience may also be an issue if your credit union doesn’t have a widespread network of branches and ATMs. If, however, you’re able to find a credit that meets all your needs, it may be time to say good-bye to your old bank for good.
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