Every now and again, some people mull switching to a credit union from a bank they might be somewhat dissatisfied. It’s far from a bad idea, but there are some credit union drawbacks people should be aware of first.
First of credit union drawbacks is that there is usually only one
Some people might have had the thought now and again to ditch the major bank they have an account with and switch over to a credit union. It isn’t a bad idea. Fees are either much lower or nonexistent.
One can also get, usually, much better rates on credit cards, auto loans, mortgages and personal loans. According to Daily Finance, a survey by the IBM Southeast Employee’s Credit Union found an average 11.64 percent APR for credit cards at credit unions, compared to 13.22 percent at banks. A 36-month used car loan carried 3.7 percent APR at credit unions and 5.47 percent at banks. A 30-year fixed mortgage was 3.22 percent at credit unions and 3.20 percent at banks.
However, there are also some drawbacks. The first is the lack of locations. Many credit unions have only one. Bank of America has thousands.
Membership can be restricted
Bank of America, Wells Fargo and Chase all have branches in every state and in every major city. One can go to any decent-sized city in America and bank with their bank. Not so with credit unions.
Credit unions also lack the sizable ATM networks banks have, though many credit unions are members of an ATM network. Say a person who lives in Princeton, N.J., who banks with a CU, visits a friend in Pewaukee, Wisc., and goes to an ATM at a CU in the same network. They won’t probably have to pay an ATM fee.
Another of the credit union drawback, as Wisebread.com points out, is that credit unions have exclusive membership conditions. It can be as little as just having to live in a city, employees of particular companies, city governments, unions and so on. Anyone interested had better do some research on the credit unions in their area.
Some credit unions, according to Daily Finance, also lack online banking and banking apps for phones that the big boys have had for a long time. Many are joining the online revolution, though.
Many advantages though
A small number aren’t insured by the Federal Deposit Insurance Corporation. That said, there’s not much chance one will need it. According to Bankrate.com, during the 2007 to 2009 recession, only 11 credit unions out of the 7,846 nationwide had “failed” as of Oct. 2009, compared to 98 of the 8,200 banks and thrifts.
Obviously, there are some benefits to joining one. The function of a CU is to ensure the financial health of its owners, who are the members. Rates on loans are often lower, as are fees charged. According to the Motley Fool, many have better yields on money market and other investment accounts than banks.