Big banks continue to have a bad rap for raising fees and cutting perks on essential checking accounts. So consumer advocates are telling Americans to consider a long-overlooked alternative: credit unions.
Because credit unions are nonprofit financial institutions, all profits are returned to its members—not customers—in the form of lower product and service fees and better interest rates on deposit accounts and loans. This method of operation is deemed friendlier in the eyes of many consumers.
For some consumers, credit unions have such a direct impact through higher savings returns and cheaper loans that it’s worth leaving a bank. However, credit unions do have a few shortcomings of their own that may dissuade you from opening an account with them.
According to the 2010 U.S. Census Bureau, there are more than 95,000 bank locations compared with more than 7,000 credit union locations in the country. The statistics may not surprise you since you have likely noticed that there are more banks than credit unions in your area.
Less access to a branch may pose an inconvenience for you if you ever find the need to conduct a banking transaction in person. Also, banks tend to place more stand-alone ATMs in places where they choose not to establish a full-fledged branch. Credit unions are less likely to do this, but credit unions may partner with certain ATM networks to provide free access.
2. Customer service
While credit unions usually offer a more personal touch when it comes to customer service, the ability to reach customer service may be limited. Banks are able to support large call centers. This allows banks to have extended hours during which customers can seek assistance. Credit unions, on the other hand, may provide a higher quality of customer support but less access to it.
As technology becomes a larger part of our everyday lives, the ability to bank online or through a mobile device is not just a luxury, but a necessity. Many credit unions offer the bare-bones online and mobile interface, which may sport an outdated look and functionality.
Additionally, banking technology has evolved to include neat features such as person-to-person payments, remote check deposit, and mobile payments. Although credit unions are making the effort to keep pace with new financial technologies, they are still trailing banks on this front.
4. Financial advice
Banks have grown to be more than just a place where customers make deposits, withdraw cash, and take out loans. They can offer a broad range of products and services that can address almost every single part of your financial needs.
Because financial planning and advice can lead to new business, banks are heavily invested in it—credit unions may not be. You should sit down with an adviser at a credit union to assess the quality of financial advice you will receive as a member.
Best of both worlds
Remember that there is nothing stopping you from having a bank account and a credit union account to take advantage of the features available from both types of institutions. After having incorporated a bank and credit union into your routine for some time, you can decide to stick with the one that best fits your financial lifestyle.
Simon Zhen is a columnist and a staff writer for MyBankTracker.com. His columns cover all aspects of personal finance, with a particular emphasis on bank rates, products, and services.