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Is a Credit Union Right for You?

Get higher interest rates, lower loan rates

A financial services employee at a desk is talking to an customer interested in savings interest rates or loan terms

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Are you tired of your big bank charging high fees, paying little on deposits and providing poor customer service? If so, you may want to consider credit unions.

A credit union is similar to a bank, but it is owned by its members. Because of this, it’s considered a nonprofit organization. This gives credit unions two advantages over banks: They don’t have to pay income taxes, and they don't have to pay dividends to shareholders. This allows credit unions to pay higher interest rates than banks, and charge less for loans, too.

I know many bank officers who think the credit unions’ tax-exempt status is unfair, and they have a point. Still, I belong to several credit unions because I’m getting better rates on my money. Here are few points to consider in determining if a credit union is right for you.

You can join a credit union.

As of March 2021, there were 5,174 credit unions in the U.S., according to the Credit Union National Association (CUNA). Those credit unions had a combined 20,916 branches. 

Many people assume that all credit unions are closed organizations, open only to a select group, such as employees of a corporation. But many of these credit unions make it easy for anyone to join. For example, one of the credit unions I belong to is Pentagon Federal Credit Union, even though I’ve never served in the military or worked for the federal government. I was able to become a PenFed member after paying a one-time $20 fee to join a charity — but they no longer require even that.

Here is a partial list of credit unions anyone can join. With other credit unions, you may have to live in a specific geographic area or work for a specific company.

Your money is insured, just like money in a bank.

Similar to the bank Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA) insures your money at a credit union. Accounts are insured to $250,000 per depositor or $500,000 for a joint account. Your money is just as safe in a credit union as it is with a big bank.

Credit unions can offer great rates for your deposits and loans.

I’ve found that many credit unions pay greater rates for deposits and charge a bit less for loans. Data from CUNA backs that up: It estimates that credit union members pay a .70 percent lower rate on new car loans and 1.4 percent less on used car loans than for-profit bank customers.

To find the highest savings rates, I go to depositaccounts.com, a site that tracks savings accounts and certificates of deposit from banks and credit unions. You can also find credit union rates in the list of highest-yielding savings rates at Bankrate.com. Because credit unions are typically much smaller than banks, they can also be more flexible in negotiating rates. I’ve gotten some bump up in rates for CDs at a few credit unions. If you don't ask, you don't get.


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You can access your money at credit unions across the nation.

I’ve found that many people are afraid of leaving the big banks because they think they’ll have trouble finding ATMs for their credit union accounts. In reality, many credit unions belong to the CO-OP Financial Services network, a confederation of 30,000 surcharge-free machines across the U.S. and internationally, including ATMs at retailers such as Costco, 7-Eleven and Wawa. There are also 5,600 shared branches so it may be just as convenient when you're traveling as the big bank.

Credit unions sometimes offer the worst investment products.

As much as I love credit unions, I tell people to watch out for pitches from a credit union's investment groups. When I open credit union savings accounts and CDs, I often get calls from these people enticing me to earn more with their investment products. They typically pitch costly annuities or loaded mutual funds.

When I press the caller, I find out they don’t actually work for the credit union. They are employees of investment firms who I learned are given access to member information in exchange for sharing the revenue generated from these sales with the credit union.

Never buy any investment product without understanding the total fees and how the product works. Better investments typically have low fees and are simple and easy to understand.

All credit unions are not equal. 

While I’m a fan of credit unions, that doesn’t mean I’m going to place complete trust in them or not shop around. Rates vary greatly and so does the service, so shop and read online reviews before joining and handing over your money.

Wrapping it up

I’ve become increasingly frustrated in dealing with the global banks giving me a return of virtually zero on my deposits, fighting over fees, and often providing horrible service. My experiences with credit unions are generally far better. Check to see if joining a credit union or two is right for you.

Allan Roth is a practicing financial planner who has taught finance and behavioral finance at three universities and has written for national publications including The Wall Street Journal. Despite his many credentials (CFP, CPA, MBA), he remains confident that he can still keep investing simple.

To learn more about accessing your money without going to the bank, watch "What You Need to Know About Online Bill Pay."  

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