Friday, November 18, 2011

Support Your Local Credit Union!

Credit Unions can be a good deal for consumers.  But like anything else, they have their drawbacks.


Should you use a credit union?  A lot of ink has been spilled about how bad the "Big Old Banks" are and how they charge users all sorts of fees.   And many folks are saying, "Dump your bank account and go to a credit union!"  And this can be a good idea.  But there are pros and cons.

1.  As a Depositor, you are a member or owner of a share in the Credit Union.

2.  There are usually fewer fees or no fees for accounts.

3.  They can provide all the services of any regular bank.

4.  They may have better interest rates on savings, for the most part.

5.  They may have better interest rates on car loans, for the most part.

6.  They may be convenient to your place of work.

These are all good reasons to use a credit union, and when I was at the Patent Office,  I was a member of the credit union and was very happy with the service there.

But of course, there are downsides as well, to any credit union.


1.  Just because you are a share owner in the Credit Union doesn't mean you get to say how it is run.

2.  Credit Unions have their share of problems too.  Some are not very well run, and even others have had fraud problems.

3.  Usually, there is some criteria for joining - you work for a certain company or are part of a defined consumer group - although this has been made more lax in recent years.

4.  They will still charge you bounce fees if you bounce a check or overdraw your account.  They can be just as "mean" as a regular bank, if you are financially irresponsible.

5.  They may have longer lines, as many people with lower incomes use them, and often get money orders, etc.

6.  They generally do not have a large network of ATMs or offices, so if you travel or need to access your money, you may be charged "foreign" ATM fees.

7.  Most Credit Unions are smaller operations and thus might not have as extensive on-line banking services, bill pay, and the like.  Or if they do, they are not as smoothly run.  Tech Support, for example, may not be as extensive.  Sometimes, that is.

So no, a credit union is not like some magic solution to all of your banking problems.   If Bank of America is charging you bounce fees, chances are, you credit union will, as well.  They are not going to be "nice" to you when you overdraw your account.

Of course, as a smaller bank type operation (although some are getting huge) they may be "friendlier" in that you can know people face-to-face, and in some respects, this can help in getting loans or occasionally having a bounce charge waived.  Maybe.

For me, having an account at the Credit Union was great.   But once I moved away, it made no sense to keep the account.  I never get charged any fees at Bank of America (since I don't bounce checks!).  As I noted in an earlier posting, if you transfer $25 to savings every month, BoA waives the monthly checking account fee.  And since you can set this up as an automatic transaction, it is a no brainer.

(If you only have $25 in your bank account, perhaps you don't need a bank account at all, but a piggy bank.)

For me, the convenience of multiple locations and no ATM "roaming" charges (since there are BoA ATMs all over the place) is a big selling point.

I might go back to a credit union - someday - if for example, they had one at the retirement home.

For young people starting out, however, they can be a very useful tool to have.  But if you are not paying fees with your existing bank and are otherwise happy with the service, I see no point in closing your account and moving it to a credit union, particularly if you use ATMs a lot.

Note that while banks are FDIC insured, Credit Unions are either insured though the NCUA or through private insurance.  Unless you plan on depositing $250,000 in a CD or something, I doubt this makes much of a difference to most consumers.

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