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Why a Credit Union Over a Bank?
A credit union is an excellent choice for people who want personalized service and a more personal experience. Most credit unions invest heavily in branch-based service and support staff. For this reason, they may be a better choice for you than a traditional bank. You can also take advantage of the convenience and online banking services.
Higher Interest Rates on Deposits
Higher interest rates on deposits at a credit union are not a new phenomenon. However, they are just starting to take hold.
The Federal Reserve announced a plan to raise rates in March of 2022, which will be the first of many hikes. Although the Federal Reserve did not specify the exact timing, it is expected to increase rates by a quarter-point or more. The rise in rates will affect the deposit strategy of both banks and credit unions.
A credit union generally offers higher interest rates on deposits than banks do. They also charge lower rates for loans. Credit unions tend to offer competitive interest rates and lower fees.
Historically, credit unions were small, community-based organizations.
There are seven million-plus credit unions in the United States, with total assets of $1 trillion. Despite their size, they do not operate with a profit motive. Because of this, they can give back to their members in various ways.
One of the best things about credit unions is their reputation for customer satisfaction. According to the American Customer Satisfaction Index, credit unions have higher customer satisfaction rates than banks.
Lower Fees on Loans
If you’re looking for a loan, a credit union offers lower fees than banks. Most banks charge application and origination fees, which can be several hundred dollars. Credit unions charge significantly lower fees and often waive application fees. These lower fees can help you save money since you don’t have to pay as much for loans and savings.
Credit unions are non-profit organizations that use their profits to help their members. This means that they will offer you lower interest rates on loans and savings accounts, which will help you save more money over the life of your loan.
Another advantage of using a credit union is avoiding minimum account balance requirements, overdrafts, and non-sufficient fund fees. Credit unions also typically have lower fees on other products, including credit cards.
However, you can only take out loans from a credit union after establishing membership. Credit unions will usually offer the lowest rate for their members, so you shouldn’t use them as a sole source of financing.
If you’re looking for a loan, NerdWallet recommends comparing loans from multiple lenders. It’s also possible to pre-qualify for several loans online and compare the estimated rates from these companies with those offered by credit unions.
Besides lower fees, a credit union offers a broader range of products. If you need a mortgage, auto loan, or credit card, it’s worth switching to a credit union. This way, your checking account won’t be cross-collateralized with other debts. In addition, credit unions usually have more ATMs than banks, and some even have partnered with surcharge-free ATM networks.
Better Online and Mobile Banking Experience
Developing a better mobile and online banking experience with a credit union is one way to serve your members better. While the task may seem daunting, core provider solutions can make it easy to start.
These solutions will help your members stay updated on their account balances and review recent transactions and alerts. They can also help them locate an ATM.
In the age of technological advances, it’s no surprise that online and mobile banking has become increasingly popular.
Most credit unions now offer mobile and online banking services, and many have top-rated mobile apps and virtual money management features. Online and mobile banking can make it easier to manage your finances and stay on top of them no matter where you are.
Besides providing lower interest rates and a more diverse range of financial products, credit unions can also offer more streamlined services. For instance, some credit unions offer no monthly service fees or minimum balance checking accounts.
Plus, their fees tend to be lower than those of banks. However, many large banks have large budgets for technological improvements and are more likely to add mobile banking services faster than credit unions.
Therefore, compare both banks’ mobile and online banking capabilities before deciding.
Ensure your account number is handy when setting up your online and mobile banking experience. Your account number is often found on paper statements and deposit slips.
You can also find it on your debit card or credit card. Once you know the account number, you can start enrolling and getting started on the mobile platform.
Less Physical Bank Branches
The physical branch network of banks and credit unions can vary significantly. Major, national banks have thousands of locations nationwide, while smaller, regional, and local banks may only have a handful of locations.
On the other hand, credit unions are nonprofit organizations with fewer physical branches and operate primarily online. Because they don’t have to pay for the operational costs that traditional banks do, they may be able to offer lower loan and deposit rates.
While bank branch closures are not new, the recent trend towards reduced branch counts is particularly troubling. According to the National Community Reinvestment Coalition, U.S. bank branches will decline by 5.13% by 2020.
Overall, branch numbers have declined by 14% from 2008 to 2020. Some closures are the result of mergers, but the majority of closures occur in low-income and rural areas.
Another advantage of credit unions is that they often have more local presence and responsive staff. This can make them more appealing to people who value personal service.
This is especially true in rural and low-income areas where the population is more likely to distrust technology. In addition, credit unions often have more affordable rates and branches.
While many of the services provided by banks and credit unions are now available online, many people still prefer to interact with a live person.
Moreover, some financial services, such as mortgages and insurance, are not readily available online. A local branch is essential for small businesses that process cash transactions.
Safer Than Banks
Although banks and credit unions offer similar services, credit unions have several advantages. First, they tend to offer better interest rates and lower fees. Second, they typically have more branches across the country.
Lastly, they may offer more customer service than banks. Credit unions are well-known for their superior customer service compared to banks, and some are more customer friendly.
However, banks and credit unions have varying degrees of rules and regulations. Banks are generally for-profit institutions owned by investors and operate under stricter regulations.
Another difference between banks and credit unions is the level of insurance. While some credit unions are FDIC-insured, not all are.
These credit unions do not carry the protection of federal insurance, but they are still relatively safe. Those with FDIC insurance are protected up to $250,000 per depositor. Moreover, both credit unions and banks have convenient hours.
Credit unions are non-profit organizations owned by their members, which means you get better rates. Moreover, some credit unions are federally insured by the U.S. government. To find out how much money is insured, you can check with the NCUA.
However, remember that credit unions are not as secure as banks. While banks may seem safe, you must consider the risk you are willing to assume by doing business with them.
If you are worried about the safety of your funds, you should consider a credit union if you have multiple loans and mortgages. Credit unions may be willing to take a risk on long-term customers. In addition, credit unions often have more ATMs than banks, and some of them have even joined surcharge-free networks.
Better Customer Service
Many consumers crave the personal touch, especially in the finance sector. Thankfully, credit unions excel at this and offer unparalleled customer service. At a credit union, you are not just an account number; you are a valued member. Credit unions are dedicated to making your experience as positive as possible, providing great rates and a people-first attitude.
Moreover, a credit union tends to be smaller and more local, serving a specific area. The people who work at credit unions are usually members, which can help improve customer service.
Furthermore, board members at credit unions are elected by the membership. By contrast, board members at banks are paid and do not necessarily represent their members’ interests.
Although credit unions offer the same services and products as banks, they may offer them at a lower price. For example, many credit unions waive fees when opening a bank account or using a credit card.
A good example is the $0 balance transfer fee on First Tech Federal Credit Union’s Platinum Mastercard(r). Most major banks charge between 3 and 5 percent for balance transfers.
Credit unions also provide higher interest rates on savings accounts and lower interest rates on loans. These benefits help consumers grow their money faster and make borrowing money cheaper.
Another important reason for choosing a credit union over a bank is the personal attention a credit union representative gives their customers. Large banks cannot offer the kind of service that credit unions provide.