5 Advantages of a Credit Union vs. a Bank Posted on December 1, 2015
from Money Is The Root of All Things Good moneyistheroot.com
I recently read an article on a very credible personal finance site listing 5 reasons that banks are better than credit unions. I have to say, I disagreed with every reason listed. Credit unions offer many benefits over banks, and I’m going to tell you 5 reasons why you should join one.
1.) With a credit union you are a member, or a stakeholder. With a bank you are simply a customer. Banks are for-profit institutions and their goal is to make money for the stockholders of the company. A credit union is not-for-profit entity and their goal is pass through the profits to the members. This comes in the form of added member benefits such as low fees and low rates.
2.) It’s a misconstrued opinion that credit unions have limited branch and ATM locations. However, many credit unions belong to larger networks, such as the Credit Union Service Centers. I joined my credit union 6 years ago, they had a branch located within office building. I have since left that company, and yet I retain my account all these years later. I have 3 locations within 5 miles, and many more available ATMs than that. Meanwhile, 2 of the 3 largest banks in the United States only have 1 location each within 1 mile of my home (Bank of America, and Chase Bank).
3.) Most credit unions offer credit cards just like a typical bank. What isn’t so typical are the exceptionally low APR rates they offer. At my C/U, there are two credit card rates, 6.99% fixed for those that direct deposit 100% of their paycheck, and 8.99% for everyone else. Go ahead and search for credit card rates lower than that, I can guarantee you won’t find them. I had a Citi Platinum card for 7 years, and after the recession they raised my rate to 18.9%. C/U credit cards offer comparable rewards just like any others as well.
4.) As I said before, credit unions have many available ATMs, but they are also fee free! The average fee for an ATM is $2.33 and is on the rise. Now if you use your bank issued ATM card at a third party ATM, then you just doubled your fees. With a credit union ATM card, you can withdraw your own money fee free as long as it’s at a participating ATM. Even if you withdraw money from a third party, you may have to pay their fee, but most credit unions don’t charge for the transactions themselves. I’m too busy to walk into a branch office every time I want to withdraw some money, and I feel that I shouldn’t have to pay hefty fees when I do.
5.) At a credit union, credit cards, home equity loans, mortgages, auto loans, and personal loans all enjoy lower rates than you will find at a bank. At the same time, savings, checking, money market, and CD’s have higher rates. I don’t typically endorse putting any significant amount of your money into savings and CD’s as inflation tends to outpace them, however, most people feel more comfortable doing so and they might as well earn a higher rate!
Banks vs. Credit Unions: Which Have the Best Interest Rates?
If you had to guess, which type of institution would you say has the best interest rates: banks or credit unions? You might be surprised to learn the answer is “both.”
GOBankingRates recently surveyed interest rates for savings accounts, checking accounts, money market accounts and a variety of certificate of deposit terms to find out if U.S. banks or credit unions are more competitive when it comes to the yields they offer account holders. See below for the findings.
On average, credit unions provide the highest interest rates for all deposit account types.
John Skul, AVP of Marketing for one of the top-ranking credit unions, Great Lakes, told GOBankingRates, “Our goal is to encourage our members to use GLCU as their primary financial institution. Offering them a fantastic rate is a win-win for both GLCU and our members – they receive a great interest rate on their checking account and we benefit when they meet the criteria to receive the great rate.”
Below is a look at how bank and credit union interest rates have changed over the past year.
While credit unions have the highest rates on average, banks boast the highest individual interest rates available today with 4.00% APY offered by Home Federal Bank and the Bank of Greene County.
Additionally, in the case of both banks and credit unions, the highest interest rates today are offered almost exclusively on checking accounts, many of which are Kasasa Cash accounts.
1. Home Federal Bank, Smart Rewards Checking
The Smart Rewards Checking account from Home Federal Bank provides account holders an interest rate of 4.00% APY on balances up to $15,000, plus tiered interest rates on balances above $15,000.
2. The Bank of Greene County, e-Savings
The e-Savings Account provides a rate of 4.00% APY on balances of $1-$1,000. Balances over $1,000 will continue to earn interest at 0.25% APY. These rates are also offered on The Bank of Greene County’s ePremiere Checking account.
3. Jeff Davis Bank & Trust Company, Kasasa Cash Checking
The Kasasa Cash free checking account from Jeff Davis & Trust Company pays 3.25% APY on balances up to $10,000 and 0.25% APY on balances over $10,000.
4. Community Financial Services Bank, Kasasa Cash Checking
Community Financial Services Bank’s Kasasa Cash Checking account earns 3.05% APY on balances up to $20,000, and 0.50% APY over $20,000, depending on the balance. A rate of 0.10% APY is offered if qualifications aren’t met.
5. Frontier Bank, Kasasa Cash Checking
Similar to the account above, Frontier Bank’s Kasasa Cash Checking account earns 3.05% APY* on balances up to $20,000, 3.05% to 0.72% APY on balances over $20,000 depending on the balance, and 0.05% APY if account qualifications aren’t met.
6. Adirondack Bank, eCO CHECKING
Adirondack Bank notes its eCO CHECKING account is “Best suited to those who prefer to handle their account activity electronically.” Account holders earn the specified rate on balances of $1 – $25,000.
7. American Trust & Savings Bank, REWARDChecking
The REWARDChecking account from American Trust & Savings Bank is a free, high-interest checking account that pays 3.01% APY on balances up to $15,000, 0.25% APY on balances over $15,000, and 0.05% APY if account qualifications aren’t met.
8. Community Bank, Reward Checking
Though the Community Bank is based in Ohio, the reward checking account is available to anyone in the country. Balances of $10,000 and under earn 3.01% APY, while balances of $10,001 and up earn 0.25% APY.
9. Ouachita Independent Bank, OIB Reward Checking
Like the account above Ouachita Independent Bank checking account holders earn 3.01% APY on balances up to $15,000, 0.25% APY on a portion of balances over $15,000, and 0.05% APY if qualifications aren’t met for the OIB Reward Checking product.
10. Southern Bank, Kasasa Cash Checking
Southern Bank’s Kasasa Cash Checking account pays 3.01% APY on balances up to $15,000, 3.01% to 0.48% APY on balances over $15,000, depending on the balance, and 0.10% APY if qualifications aren’t met.
Banks vs credit unions: 8 things to consider when choosing where to bank
Choosing where to bank is a personal decision that has a big influence on how you manage your money and time. Your main choice is between a bank and a credit union. Banks and credit unions offer essentially the same products and services, but there are huge differences in the way they operate. Whether you’re just starting out or rethinking your current financial setup, here is what you need to know about the differences between the two:
Credit union: People before profits (co-operative model); profits are reinvested in the credit union to serve members better, plus some are shared directly with members and communities.
Bank: For profit; profits get distributed back to shareholders.
Credit union: Credit unions tend to be local and have fewer branches, but thanks to ATM network sharing you can use most other Canadian credit union ATMs free of charge (there’s a network of 4,000 ding free ATMs, which is larger than some of the big bank’s ATM networks).
Bank: Big banks are present in most major cities, which will give you free access to your money nationwide. However, if you need to use another bank’s ATM, get ready to pay a higher service charge.
Credit union: You may not think that credit unions provide the latest technology; however, most provide mobile apps that are comparable or better to bank apps.
Bank: Banks (especially the larger ones), typically offer great technology. Banking apps will support your love for on-demand banking on your smartphone.
Credit union: For the 12th consecutive year, Canada’s credit unions were awarded the Ipsos Best Banking Award 2016 for Customer Service Excellence.
Bank: Banks fall short of credit unions when it comes to overall satisfaction.
Credit union: On average, the largest credit unions have lower fees than the largest banks.
Bank: On average, the largest banks have higher day-to-day chequing account fees than the largest credit unions.
(Based on a fee schedule survey of the five largest Canadian banks compared to the five largest Canadian credit unions.)
Credit union: Owned by credit union members; run by a local board of directors elected by fellow credit union members.
Bank: Owned by shareholders; run by a board of directors who aren’t necessarily bank customers.
Credit union: Members can vote on how their credit union is run.
Bank: Customers have no say in how their bank is run.
Credit union: Deposit protection ranges from up to $100,000 to an unlimited amount depending on the province (unlimited in British Columbia).
Bank: Protection up to $100,000 (CDIC—Canada Deposit Insurance Corporation).
At the end of the day, choosing a financial institution is an important decision. If you make the effort to ask questions and compare services, you’ll find the best home for your finances.
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It's a Money Thing is a financial education series supported by credit unions across North America, including Vancity. It aims to engage and teach young adults about money.