Online Calculator | The Advantages of Switching to a Credit Union

The Advantages of Switching to a Credit Union

Fed up with high bank fees? You’ll get a better deal at a credit union!

If you’re getting tired of paying increasingly high fees and penalties to your bank while getting only pennies in interest every month, you’re not alone. A growing number of Americans are now closing their bank accounts and moving their hard-earned cash to credit unions instead. What if you did that? Would the treatment be better and worth the hassle?

Credit Unions vs. A Bank

The main reason consumers tend to have better experiences dealing with credit unions is that their corporate structure is totally different from the banks’.

  • A credit union is owned by its customers, each of whom automatically becomes a member. Each member has one vote, regardless of how much money they’ve deposited in the credit union, or how much they’ve borrowed – which makes the credit union a uniquely democratic institution. By comparison, banks are owned by shareholders, the interests of whom are a higher priority than customers.
  • A credit union is a non-profit, whereas a bank is in business to make money for its shareholders. Thus, the focus for a credit union shifts from profit to customer service. Since credit unions don’t pay taxes, there’s more money to go around, too. A profit gets distributed to members as a dividend. You might also like to know that the kind of overhead, salaries, and bonuses for executives aren’t in play such as a traditional bank.

Lower Fees and Loan Rates

If you go overdrawn or bounce a check on your credit union account, you’ll have to pay a fee and/or a penalty, but it will still cost you far less than your bank would charge. You’re also less likely to pay for ATM withdrawals, checks or electronic banking if you’re with a credit union, plus you receive a slightly higher interest rate on your money. Both of these factors are likely to add up in a nice interest dividend for you each month.

Mortgages, auto loans, or other loans from credit unions often have competitive interest rates, and that can save thousands over the lifetime of a loan. The average rate on a 48 month car loan from a credit union is 5.15 percent, while one from a bank might have a rate of 6.34 percent. Similarly, if you obtain a one-year adjustable rate mortgage from a bank, you’ll typically pay 4.73 percent, but one from a credit union could have a rate as low as 4.32 percent.

Cheaper Credit Cards

A recent Pew Charitable Trusts survey found that credit unions charge 20 percent less interest on credit cards than banks do. Of credit unions, only 25% have a fee for transferring balances from another credit card, compared to 88 percent of banks. Be cautious however – make sure your credit union issues in house credit cards. Many of the smaller ones simply offer credit cards issued by the major banks such as Chase, in which case you’d be subject to Chase’s fees and conditions.

Loans are easier through credit unions

Since credit unions mostly stayed away from sub-prime mortgages, they were largely unaffected by the recent credit crisis that is still making the banks reluctant to issue loans, even to those with good credit. Credit unions take up some of the slack, and have been lending a bit more this day. If you have a decent credit history and FICO score, your best option for a loan might be a credit union.

Who is eligible to join a credit union?

You might think credit unions are open only to specific groups, and that you have to belong to a particular trade union, church or ethnic group to join one. Finding a credit union that will take you is incredibly easy these days. There must be something in common with other members, but the rules are pretty relaxed these days as credit unions are often occupation or community based.

There are several online resources where you can find out more about credit unions and locate one that will accept you as a member. You too can benefit from moving your deposits, loans and other financial products to a credit union today!

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