Your Money: Are Credit Unions Better Than Banks

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Following the U.S. recession between 2008-2012, major Banks beared the stigma for America’s financial crisis. While our government spent billions to bail out Banks and other financial institutions like Lehman Brothers and Bear Stearns, many Americans felt less confidence in their Banks to stay afloat considering the closure of several Banks.

For example, in one Gallup poll, the findings discovered 36 percent of Americans had “very little or no confidence” in Banks. A separate Gallup poll showed 28 percent of Americans have a great deal or “quite a lot of confidence” in Banks.

Part-1 Of “Your Money Series” Focus On Finance, Investments, Ways To Earn Business Ownership Profits, Money-Making Tips, Small Business News & Advice, Business Strategies, And How-to Use Social Media To Increase Profits For Your Business.

The recession gripped the economy so tight beginning in 2008, that many people searched hastily to stash their hard-earned money elsewhere. And this is one time recently where Credit Unions substituted for traditional banking.

There was a long list of Banks that failed in the 2008-2012 recession.

Credit Unions Serve Members

Expert Pat Keefe offers his views. “Credit Unions are cooperatives owned by their members.” Keefe serves as Spokesman for the Credit Union National Association.

“Their mission is to provide their members affordable financial services and not to gouge them as profit centers,” Keefe said in an article published by Bankrate.com. Keefe further commented in the article that “Credit Union members across the the country recently saved nearly $6.3 billion dollars by doing business at Credit Unions instead of Banks.”

Credit unions hold $1.026 trillion in assets and have 30,000 ATMs spread across the country, according to Credit Union National Association.

Also according to Credit Union National Association information published in a U.S. News report: more than 100 million Americans currently use the 6,900 Credit Unions in the country.

“A lot of people know about Credit Unions, but the advantages aren’t always top of mind,” said Patsy Briotta, in a Fox Business online news article. Briotta is a Spokesperson for National Association of Federal Credit Unions located in Washington D.C.

“Often times,” Briotta explained, “People don’t look into Credit Unions until they’re shopping for a particular product like a mortgage or a car loan or when they move and need a new Financial Institution.”

greg mcbride
greg mcbride

“Consumers have become more conscious of where their dollars are going ever since the recession,” Greg McBride said in an interview with NewsBlaze. McBride is Senior Vice President and Chief Financial Analyst for Bankrate.com.

“And people,” McBride added, “are more sensitive to higher fees (often charged by Banks) that can be avoided elsewhere.”

So why choose a Credit Union when Banks are available on practically every main street across the nation?

Are Credit Unions Better Than Banks?

The simple answer to the latter in the opinion of financial experts and credit union members is a resounding – “yes.”

Credit Unions have an edge over Banks when dealing with customer service because the Union’s benefits are so attractive to potential customers. And Credit Unions operate a bit differently to the way Banks operate.

Here’s why.

The difference between Credit Unions and Banks is the ownership structure. Although both are owned by shareholders, Credit Union shareholders are the Union’s members (customers). On the flip side, while Banks operate as “for profit,” Credit Unions are nonprofits and the Union has fiduciary responsibility to its members.

As a “for-profit” industry, Banks focus on earning quotas for shareholders, but Credit Unions aren’t required to focus on earning quotas or high interest returns for their own shareholders.

Greg McBride explains the reason behind higher fees charged by Banks.

“Banks’ fees are higher than what is found at Credit Unions because they are for-profit,” McBride told NewsBlaze. McBride cautioned that consumers need to shop around for the most competitive terms.

“Neither Banks nor Credit Unions have a monopoly on competitive loan offers.”

Overall, as a not-for-profit industry, Credit Unions are only committed to providing high value for members through lower-interest loans and financial transactions.

But Banks do have some advantages over Credit Unions.

Richard Hunt, CBA
Richard Hunt, President and CEO of the Consumer Bankers Association.

“Large Banks have greater resources at their disposal than Credit Unions,” said CEO Richard Hunt of Consumers Bankers Association. “These resources give big Banks the ability to make investments on emerging technologies such as mobile banking apps,” Hunt said in a Bankrate article.

Interest Rate Difference

Comparing loan interest rates offered by Banks and Credit Unions, the Unions are a better choice according to many financial specialists. Specialists insist that Credit Unions have always offered lower interest rates on loans and that members earn earn higher rates on interest-bearing accounts.

For instance, according to a National Association of Federal Credit Unions “daily loan-savings” chart, a 48-month term on a new car loan generally has an interest rate of 6.75 percent when issued by a Bank (depending on credit history). If a Credit Union carried the same new car loan, the interest rate is lower, with a rate of around 5.42 percent.

Among the other fee-based differences, take for example a Certificate of Deposit(CD). The average rate on a 12-month $10,000 (CD) held by a Bank is approximately 1.79 percent, and the same CD term stored away in a Credit Union carries a higher rate of 2.39 percent.

McBride said a five-year CD can vary but “Credit Unions have a 1.65 percent interest; and 0.87 percent at Banks.”

Are you thinking of joining a Credit Union? Yet you’re not sure how or where to look. Well don’t fret. The NewsBlaze Research Team has dug up valuable information to give you a head start. The Credit Union National Association has an online credit union database which allow users to search by zip code. (www.cuna.org)

Findacreditunion.com provides a more detailed website listing names of Credit Unions including information on how Credit Unions operate on all levels to serve members.(www.asmarterchoice.org/find-a-credit-union).

Comparison of Services

Below is a more in-depth view of how Credit Unions operate their services in contrast with traditional Banks:

Loans

Obtaining a loan is the biggest valuable benefit for a credit union member. Credit unions score a touchdown involving loans. Due to credit unions’ ownership structure, they are not required to adhere to such stringent loans restrictions, and loan eligibility is also not mandated by a corporate entity. And since a credit union enjoys nonprofit status, this means they are not required to charge excessive interest rates on loans whether they are auto loans, business loans, or mortgage.

Bottom line: credit union loans are much cheaper than Banks.

Credit Cards

Score this one for traditional Banks. Banks have advantages over Credit Unions in this category. Sesame Credit Expert John Ulzheimer explained in an interview with NewsBlaze that Banks offer better benefits with their credit cards than what some Credit Unions offer although Credit Unions still have lower interest fees on certain products.

“But there are exceptions,” Ulzheimer said.

“For example, most Credit Unions do not offer zero percent introductory rates on credit cards, while Banks do.” Ulzheimer further said, “Most Credit Unions do not offer zero percent rates on auto loans, yet some Banks do.”

“As for fixed rates on credit cards,” Ulzheimer added, “It’s not uncommon to see rates as low as 9.99 percent on a Credit Union card, which is pretty uncommon for a Bank issued card.”

Banks also fare better than Credit Unions on credit card limits.

“While Banks offer credit limits in the $20k -$30k range you are unlikely to get the same amount from Credit Unions,” Ulzheimer said during the NewsBlaze interview.

“You’ll likely get around 1/3rd of that amount on a Credit Union card,” Ulzheimer said.

Offering wise advice, Ulzheimer cautioned, “So while you may find a better deal at a Credit Union it’s not like they (credit unions) always beat a Bank’s interest rate.”

“And of course, your credit still has to be good enough to qualify you for the best deal, regardless of whether you’re shopping at a Bank or Credit Union,” Ulzheimer concluded.

Checking Account Fees

Unlike traditional Banks, the credit unions return profits to owner-members. This strategy allows account fees to remain lower than what Banks usually charge for service fees. A credit union member has access to free checking – which means that credit union accounts are not bound by stringent restrictions in the same manner that major Banks are. Further, as a credit member the rules of the money game forbid members to pay “nuisance” fees that Banks are known to charge their customers for things such as transfers, direct deposit, wiring funds from accounts, and balance transfer fees.

Insured Deposits

Although Bank deposits are insured up to $25,000 dollars by FDIC, credit unions deposits have equivalent deposit insurance with the National Credit Union Share Insurance Fund. Comparing insurance coverage for both, it is fair to conclude that credit unions and Banks are pretty much even.

ATM Service

Unlike Banks, which charge customers extra fees for using ATMs belonging to another Bank or business, a credit union is connected to National ATM Networks for use by all credit union customers. And many credit unions reimburse ATM fees that another business may charge their members. Credit Unions also afford members person-to-person customer service instead of typical voicemail and foreign call centers that Banks often use.

Conclusion

Credit Unions thrive on being the best choice for members to bank their funds and in return members are rewarded with lower interest rates on loans, free checking, and other low cost financial transactions. Many Credit Unions offer members free seminars on topics like preventing identity theft and managing credit cards. And just like prominent Banks, Credit Union websites are chock full of articles, tools and other valuable resources to educate members/customers about making smarter financial choices to maintain and manage lifeline funds for the future.

Banks versus Credit Unions.
Banks versus Credit Unions.

As an analyst and researcher for the PI industry and a business consultant, Clarence Walker is a veteran writer, crime reporter and investigative journalist. He began his writing career with New York-based True Crime Magazines in Houston Texas in 1983, publishing more than 300 feature stories. He wrote for the Houston Chronicle (This Week Neighborhood News and Op-Eds) including freelancing for Houston Forward Times.

Working as a paralegal for a reputable law firm, he wrote for National Law Journal, a publication devoted to legal issues and major court decisions. As a journalist writing for internet publishers, Walker’s work can be found at American Mafia.com, Gangster Inc., Drug War Chronicle, Drug War101 and Alternet.

Six of Walker’s crime articles were re-published into a paperback series published by Pinnacle Books. One book titled: Crimes Of The Rich And Famous, edited by Rose Mandelsburg, garnered considerable favorable ratings. Gale Publisher also re-published a story into its paperback series that he wrote about the Mob: Is the Mafia Still a Force in America?

Meanwhile this dedicated journalist wrote criminal justice issues and crime pieces for John Walsh’s America’s Most Wanted Crime Magazine, a companion to Walsh blockbuster AMW show. If not working PI cases and providing business intelligence to business owners, Walker operates a writing service for clients, then serves as a crime historian guest for the Houston-based Channel 11TV show called the “Cold Case Murder Series” hosted by reporter Jeff McShan.

At NewsBlaze, Clarence Walker expands his writing abilities to include politics, human interest and world events.

Clarence Walker can be reached at: [email protected]