It's been a tough few years for big banks, and customers are paying a price. The effort to lift profits means fees and loan rates are on the rise; now that federal rules limit what banks can charge retailers per debit card transaction, some are tacking on a monthly fee for debit card use. Chase began testing a monthly $3 fee for debit card users in Wisconsin last year, and Wells Fargo planned to test a fee in several states starting this October.
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Credit unions, meanwhile, are offering some attractive deals. With their volunteer boards and no stockholders to please, credit unions never took the risks that larger banks did by investing in derivatives markets, explains Bill Hampel, chief economist at the Credit Union National Association, a trade group. So the financial crisis was not nearly as hard on them, he says.
"In the aggregate, credit unions offer better rates than other financial providers. So I always encourage consumers to do comparative shopping before opening accounts or signing on the dotted line for loans," says Debbie Matz, chairman of the National Credit Union Administration, the independent government agency that regulates and insures federal credit unions and can have authority over state-chartered ones, too. In September, while five-year new-car loans at banks carried an average interest rate of 5.1 percent, credit unions were quoting 3.73 percent, for example.
Late-payment, overdraft, and ATM fees are also typically lower. CUNA estimates that in the year ending March 2011, credit union customers saved $6.78 billion in interest and fees compared to bank customers. It's unclear whether any credit unions might eventually feel a need to charge for debit card use, but if so, any fees will likely be considerably less than those at banks, experts say.
Membership is often predicated on location or occupation. But there are 7,500 credit unions in the country, and many have teamed up so you can do business in any of their branches. Online services are now common, and many organizations allow customers to use a nationwide network of 28,000 surcharge-free ATMs, often installed at 7-Eleven stores. Some offer mobile banking and deposits from home scanners. And once you're in, you're in for good.