Are Credit Unions Really Better Than Banks?

Reader Jim Walls offers this advice about how to avoid banks entirely, but going to its socialist equivalent, the credit union. We thought it was an interesting, succinct explanation on why you might want to look at credit unions as the panacea for all our banking problems.

That is, of course, until a credit union screws you over.

Still, there is much merit to Jim’s argument. Have a taste.

Here’s the simple reality: Banks have shareholders who want to see a profit on their investment. So banks do everything in their power to get as much money from their customers as is legally possible while still remaining competitive with other banks. Here’s a case-in-point: Citizens Bank paid the Phillies $92 for the naming rights to their new stadium. Where did that money come from? Customer fees.

Most people just accept it. After all, what choice do they have?

I’ll tell you: Credit unions. The owners of credit unions are the members themselves. So there are no fat-cat shareholders to answer to. As a result, credit union profits are returned to members in the form of fewer fees and better interest rates.

And thanks to relaxed laws regulating who could and couldn’t join a credit union, virtually everyone in America can join at least one. I’m a member of three, myself–credit unions have killer car-loan rates to begin with. Being a member of three allows me to easily comparison shop.

Banks don’t want you to know about credit unions. They’re spending millions to lobby the government to keep them under wraps. And for good reason. If most people knew about the benefits, all the big banks would be out of business.

Some benefits of credit unions?

Checking accounts are usually free with no ridiculous minimum-balance requirements. You’re not going to get hit with fees for dipping into your overdraft. You can buy your checks at-cost. And there are no per-check fees or any of that other crap banks like to slip in while you’re sleeping.

How about ATM fees? Most credit unions are members of a national network of credit union ATMs, so you get access to literally tens of thousands of machines across the country with zero surcharge. Few, if any, credit unions charge you to use someone else’s machine. (Of course, the ATM’s bank will probably still hit you with a surcharge, but at least you’re not going to have to pay twice).

As for interest rates, credit unions consistently average better car loan rates than the bank, and even rival those offered at most car dealers (who are offering you teaser rates to get you in the door). Your savings, CD, money market, and mortgage rates are all going to kick ass too. When it comes time to finally move out of mom’s house and into your own home, you won’t have to pay all the shitty, sleazy “service,” “commitment,” and “underwriter’s fees”
AKA “junk fees”
that banks tack on to their mortgages. Better still, most credit unions won’t slam you with a several-thousand-dollar “prepayment penalty” like Bank of America did when I refinanced the mortgage I had with them.

When you look at the reasons most people use a bank (direct deposit, check cashing, bill paying, and ATMs), you’re going to save cash. Maybe as much as $100,000 over your life, by some estimates.

I don’t work for credit unions, I’m just a big fan. Of course, there are some credit unions that have lost a little focus and pull some of the same stunts as banks, but they are the exception and certainly not a rule.

Comments

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  1. Josh says:

    Speaking as a member of 2 Credit Unions and until Recently 2 banks I agree with Jim. My car loan rate is great and when an error in auto payment of the loan occurred I was not charged a late fee.

    I was a Bank One user in the past but after my first month there I had to start paying to see a teller and just stopped using the account. I was hit with inactivity fees which took my balance below $0 before I got any notice from the bank and then got hit with 2 Overdraft charges before I got my first bit of paperwork. In total I “owed” Bank One ~50 bucks before I had a piece of paper from them about the inactivity fee.

    The Credit Unions I am at are Open to Members of the surrounding counties so anyone can join and they have “partnerships” which let me even do actual banking at other area credit unions, which includes making deposits and other normal banking operations.

    The one bank I am still part of may be getting ditched as well since they cut Saturday hours in the city where I live and I basically keep them for cashing checks when I am working which is not often (worried about another inactivity fee).

  2. tby says:

    My credit union must not have gotten the memo about fees and interest rates. I like my credit union because they are small – the service is great and my calls are usually answered by someone at my local branch.

  3. sixtoe says:

    Seems like the biggest drawback for most people is that credit unions have fewer branches than banks. But in an age of Internet banking, it’s not a dealbreaker anymore.

  4. SadhanaAlcyone says:

    This article is spot on! Credit unions rule! I am a member of two myself. I financed a car through the Fairwinds Credit Union (I live in Florida, don’t know if they have them elsewhere), and got the best rate anyone could have given me.

    I was actually at a WaMu a few days ago with my dad, and the chick that works there starts asking me about who I’m banking with. After I told her I belonged to a credit union, she had the balls to ask me “What are they offering you that we can’t?”. How about the fact that they’re still gonna be around tomorrow, bitch? I damn near laughed when she asked me that question.

    And yes, the only drawback is the lack of branches. But Fairwinds is actually extremely convenient for me. There’s a branch literally at the end of my street, and another one about five minutes from my job. I would recommend them to everyone.

  5. SwatiCethegus says:

    I have been a member of a credit union for about 12 years now.I went to them after getting the shaft by every bank in our town in one way or the other.I travel full time in an RV and only carry my credit union visa credit/debit card.I pay all my bills online and also shop with my card.I only pay fees from another atm.My money is safer and easier to get when needed.Loan rates are much better and savings/checking interest is better too.I will never go back to banks again.I can even invest through my credit union and it`s also fdic insured.

  6. pirate_eggie says:

    Strangely, my credit union also has fees, but my parents’ credit union is phenomenal. Never had a complaint with them.

  7. MisterE says:

    I’ve been a member of Navy Federal Credit Union longer than I can remember. Just recently, they started accepting members from all branches. I’ve never used any bank – and now I’m thankful.