I recently opened up a checking account at a credit union. Why did I do this? Because we’re no longer in an era where you can show up at any bank and open a free checking account. These days companies (banks included) are trying to squeeze every dollar they can out of us. Bank of America demonstrated this when they recently announced a $5 monthly fee for using their debit card, only to retract after customer outrage.
Credit unions are similar to banks in that they offer checking and savings accounts, loans of all types, and often credit cards. But the key difference is that credit unions are owned and run by their members, while banks are not. When you open up any type of account or loan, you automatically become a member. You “own” a small piece of that credit union. Theoretically, credit unions exist only as a benefit to their members. For this reason, borrowers and savers alike will often find the best interest rates at credit unions.
At most credit unions there are certain qualifications you have to meet to be able to join. For example, you might have to live in a certain geographic area, work at a certain place, or have someone in your family who’s a member.
While credit unions are in business solely to benefit their members, they differ in both size and scope. I actually belong to two different credit unions — one small and one large. The small one is a county-wide entity with 4 or 5 branches spread out across the county. It’s here that I have my car loan. The larger one is state-wide, with branches all over the state. Because I have my checking account here, fee-free access to ATMs is important. Not only do they have their own network of ATMs across the state, but you can also find one at certain gas stations.
Credit unions also differ in scope. Some only offer a few basic services such as loans and checking accounts, while others also offer insurance and retirement planning, among other things. You might even find discount tickets or free workshops. I once attended a workshop on mortgage basics geared towards first-time home buyers.
One thing I like about credit unions is that the atmosphere is often friendlier than what you’d get at a cold, impersonal bank. Because credit unions are owned by their members and aren’t required to act in the interests of shareholders (as are banks), they’re able to make choices that benefit the customer.
I have a story which illustrates the superior customer service you can expect at the majority of credit unions. A few months back I was in the process of switching to a new bank, and I was setting up the bill-pay feature at my new bank to automatically send payment for each of my bills every month. I must have entered in the wrong amount for my car payment, because the following month I got a call from the credit union saying that my payment was one cent short. They called me about one cent! Instead of charging me a fee as the big banks would for a late payment, they did the right thing and called to report it to me before the due date.
Before joining a credit union, it’s important to consider your needs. Whether you’re looking for an auto loan, a CD (Certificate of Deposit) or something else, be sure to compare the rates of competing credit unions in your area. To find a credit union near you, use the Credit Union Locator at NCUA.gov.
Photo by RikkisRefugeOther