Banks Versus Credit Unions: Which Is Better?
People ask, "What is the best bank in a given location?" or "What is the best bank for a specific kind of customer?" Rephrasing the question to "What is the best financial institution?" is the way to find what's best.
It is positively amazing how many people put up with all the fees many banks and other financial institutions attach to their savings, checking, and credit card accounts. Those banks and financial institutions will keep on doing it as long as the consumer keeps letting them get away with it. There is no excuse for the consumer to tolerate these kinds of bank fees when there are so many alternatives available.
Avoid National Banks and National Credit Card Companies
National and local credit unions and local banks are the way to go.
The average consumer should never do business with a national bank or national credit card company. Check out your locally owned banks; even better, check out your local or national credit unions.
National debit card companies might be OK: read the fine print.
Customers who have followed the above principles:
- Have not paid any monthly account fees in decades.
- Have not paid any check fees in decades.
- Have not paid any credit or debit card transaction fees in decades.
- Have always been paid higher interest on their savings.
- Have always paid lower interest on their loans.
- Have always experienced the bliss of fewer and lesser fees all-around.
What Exactly Is a Credit Union?
A credit union in the United States is technically a co-op arrangement among members. Those members with money make deposits. Those members who need money take out loans.
The spread between the interest paid to members with savings and the interest collected from members with loans is supposed to be no larger than what will cover the co-op’s expenses.
The covered expenses also enable both savers and borrowers to have free checking accounts, no-annual-fee debit and credit cards, and many other free or lesser fee services. Many countries have these same co-op type institutions; they are just called by different names.
About Credit Union Membership
With banks, you are a customer. With credit unions, you are a member.
It used to be difficult to become a member of a credit union. The usual requirement being you were working for a specific employer. In fact, many times the credit union was actually named after the employer. Many of these credit unions are still in existence today.
Membership requirements these days are much more open. Every credit union has unique criteria.
Credit unions did not come up with the idea of membership requirements. Federal regulations require members of credit unions to have something in common, usually being the mutual employer scenario.
However, other criteria can now be used; just being a member of a certain profession is a good example.
What opened the floodgates is the now current use of geographical location as to what determines eligibility. In other words, are you and the credit union in the same county? If so, congratulations; you are a member. The credit union website will clearly spell out the eligibility requirements to become a member.
If you do not qualify, it is neither their fault nor yours; federal regulations are federal regulations. The good news is your chances of success are fairly high. Worst case scenario is you merely proceed to your local bank instead.
Savings and Loans (S&Ls) can also be a good choice (if there are any left in your area). Internet-based financial institutions are also worth checking out, but be very careful and check their reputations and fee schedules with a fine-toothed comb.
The Good, the Bad, the Ugly.
About Your Local Banks and Credit Unions: The Good
Here is the normal fee structure at your good locally owned banks and credit unions:
- There are no membership fees. There are no annual or monthly credit card fees. There are no annual or monthly debit card fees.
- Savings accounts have no monthly or other fees. A minimum balance requirement of a couple hundred bucks is acceptable.
- Checking accounts have no monthly fees and no minimum balance requirements. The requirement you have a savings or similar account with a reasonable minimum balance to qualify for the free checking account is an acceptable option. Using the direct deposit option to qualify for a free checking account is not always a good idea; getting slammed with a bunch of fees when you lose your job is not the way to go. On the other hand, qualifying based on direct deposit of your Social Security retirement check certainly isn't much of a risk.
- No debit card point-of-sale fees of any kind.
- No credit card point-of-sale fees of any kind.
- Very minimal or no ATM fees on debit card transactions.
- All other fees are less than what you are paying at your current financial institution.
About Your Local Banks: The Bad
It should be noted some local banks can be even more obnoxious than your national banks. Local banks are just like any other locally owned business. Employee attitude will directly reflect the personality and attitude of the owner(s) of the bank.
Fortunately, the bank’s fee structure is very often a clear indication of the bank’s attitude towards the general public. Ridiculous and excessive fees? Go elsewhere.
About Your Local Credit Unions: The Ugly
Credit unions are well-known for being the better deal. As such, there are bankers-to-be who come out of the woodwork to take advantage of the better reputation credit unions have.
The methodology to do this is not difficult. The banker-to-be simply opens his business via and under the credit union regulations and rules. Then, as far as interest rates and fee structuring goes, they run it like a bank.
There is a credit union in San Francisco that is positively famous for this. So just because an institution calls itself a credit union doesn't mean you are home free. Do check out their fee schedule and their interest rates relative to other institutions.
Needless to say, your location will vary.
How to Find Your Local Banks and Credit Unions
Finding them is not hard to do. The usual Yellow Pages perusal and/or an internet search will turn them right up. And it should be noted there are excellent national credit unions as well.
As to finding the good ones, you will need to check their website. Find their fee schedule and you will usually know what you need to know. If they do not have a fee schedule online, then that is a possible red flag.
If your choices are limited, then you may have to make a personal visit to the financial institution and check out their brochures in the lobby.
Those financial institutions having the "glass cage" setup you must navigate to enter and exit the premises should be avoided like the plague. For some reason, there seems to be a strong correlation between "glass cage" usage and the treatment of customers as peasants in general.
You can also find a local credit union, plus all sorts of other worthy credit union information, at the federally run Nation Credit Union Administration (NCUA) website.
You can find all sorts of interesting information about your local banks at the Federal Deposit Insurance Corporation (FDIC) website. They even maintain a public list of failed banks.
Next is the opening of an account. A driver’s license, Social Security card, and a pleasant attitude are all that should be required. If the bank or credit union employee, or the procedures in general, are unusually obstructive; then forget it and move on. If they require you have an account with them for at least six months before allowing you to apply for a debit card, then you definitely want nothing to do with them.
Worthy Internet Institutions
There are worthy internet-based institutions out there. Just thoroughly check their fee schedule; particularly as relates to their savings and checking accounts, and their credit and debit cards. Also, plug their name and the word "scam" into your search engine and see what pops up. If there are pages of complaints, it would probably be wise to avoid that particular institution.