With rising interest rates and economic uncertainty in 2024, many people are looking for ways to save money and find better banking services. One option to consider is switching from a traditional bank to a Credit union.

Credit unions are member-owned, not-for-profit financial cooperatives that provide many of the same services as banks but often with better rates and fewer fees. Here are 7 compelling reasons you may want to make the switch to a credit union this year.

Key Takeaways

• Credit unions offer higher interest rates on savings accounts and CDs and lower rates on loans than traditional banks. This can save you money over time.

• Credit unions have fewer and lower fees than banks. This puts more money back in your pocket.

• Credit unions are member-owned cooperatives focused on service, not profits. This leads to better customer service.

• Credit unions are more likely to offer personalized service and financial education than big banks. This can help you make better financial decisions.

• Credit unions often invest back into the local community. This aligns with many people’s values.

Reasons To Switch To A Credit Union This Year

1. Earn More Interest and Pay Less on Loans

One of the biggest financial benefits of using a credit union is that they typically pay members higher interest rates on deposit accounts like savings accounts and CDs. According to the National Credit Union Association (NCUA), the average savings account rate at credit unions is 0.17% higher than the average at banks. The gap is even wider for 12-month CDs, where credit union rates are on average 0.50% higher than bank CDs.

In addition, credit unions charge lower interest rates on loans including mortgages, auto loans, and personal loans. For example, in 2023 the average credit union rate for a new car loan was about 2% lower than the average bank rate. Over the life of a $25,000, 5-year auto loan that 2% savings would amount to $1,000. Credit unions can offer better rates because they are non-profit cooperatives focused on member service rather than making profits for shareholders.

2. Pay Fewer and Lower Fees

Big banks seem to nickel and dime customers with all kinds of account fees – monthly maintenance fees, overdraft fees, ATM fees, etc. The average bank checking account has around 11 fees according to Bankrate. Credit unions, on the other hand, have far fewer fees. A 2020 study by MyBankTracker found that the average credit union checking account had only 2.8 fees compared to 11.2 fees for the average bank checking account.

On top of having fewer fees, the fees credit unions do charge tend to be lower. For example, overdraft fees average around $30 at banks but only $20 at credit unions according to MyBankTracker. Monthly service fees average $14.50 at banks and just $4 at credit unions. By using a credit union, you’ll deal with fewer annoying fees and put more money back in your pocket each month.

3. Member-Focused Service

Unlike big banks that serve shareholders and the bottom line, credit unions are not-for-profit cooperatives that exist only to serve their members. This key difference often translates into better customer service at credit unions. Credit unions usually offer more personalized service along with shorter wait times than big banks where you often feel lost in the shuffle.

According to a survey by the Credit Union National Association, 80% of credit union members were very satisfied with the service they received compared to just 48% of bank customers. Credit union members cite helpful staff, short wait times, and more personalized service as major benefits. For many people fed up with poor customer service at big banks, the switch to a credit union is about finding a financial provider focused on service, not profits.

4. Personalized Expert Financial Advice

For personalized financial advice and education, credit unions also outshine big banks. Walk into a bank and you’ll have a hard time finding anyone willing to review your full financial situation and offer expert guidance free of charge. At credit unions, financial counseling and advice are a core part of their service model.

Credit union members can sit down with a financial advisor and get help with budgeting, debt reduction, understanding loan options, setting financial goals, and more without paying fees. The staff has specialized expertise, and they take the time to understand your full financial picture. For ongoing financial education, many credit unions offer free seminars on topics like retirement planning, home buying, and identity theft prevention. At big banks, you’ll pay steep fees just to talk to a financial advisor.

5. Community-Focused Values

Do you want your financial institution to give back to the community or charge excessive overdraft fees? Credit unions are much more likely than banks to invest back into the communities they serve. It’s built into their mission. The average credit union donates about 10% of pre-tax earnings each year to charitable causes. This amounts to hundreds of millions in donations according to the Credit Union National Association.

Credit unions also encourage member volunteerism and participation. It’s not uncommon for credit union employees to volunteer at local schools, charities, and community events. Banks answer to shareholders first while credit unions focus first on being good community partners. For many, this aligns better with their values.

6. Open Membership

Unlike big banks that only serve certain segments like wealthy clients, membership at most credit unions is open to all who share a common bond like living in a certain area. About 40% of credit unions have entirely open membership meaning anyone can join. This openness provides greater access to responsible financial services.

For instance, if you live or work in a certain county, you can probably join a local credit union. Look for ones with Select Employee Groups (SEGs) that allow people who work for certain approved employers to become members. For those seeking fair access and a financial institution focused on inclusion, credit unions are a refreshing alternative to restrictive banks.

7. All the Same Services

Some worry that switching to a credit union means sacrificing convenience or services. Rest assured, credit unions offer nearly identical products and services to traditional banks. Members have full-service checking and savings accounts with debit cards, online banking, mobile apps, bill pay, and related services. Credit unions offer mortgages, auto loans, personal loans, and business loans with competitive rates.

You’ll also have access to Certificates of Deposit (CDs), Individual Retirement Accounts (IRAs), and investment advisory services through partner firms. The only thing you may miss is the ability to bank at branches across the country, but shared branching makes up for this in most areas. With online and mobile banking so convenient, the branch location difference is minimized.

Frequently Asked Questions

What is a credit union?

A credit union is a member-owned, nonprofit financial cooperative focused on providing services to its members rather than making profits like a bank.

Who can join a credit union?

Most credit unions have open membership policies that allow anyone living or working in a certain area to join. Some are open to all.

What products and services do credit unions offer?

Credit unions offer similar services as banks like checking and savings accounts, credit cards, loans, mortgages, online banking, mobile apps, etc.

Will my direct deposit and automatic payments still work if I switch?

Yes, you can seamlessly transfer direct deposit and automatic payments to a new credit union account. Just provide the updated account details.

Is my money insured and safe at a credit union?

Yes, federal insurance through the NCUA protects funds up to $250,000 at federally insured credit unions, the same as FDIC insurance at banks.

Will credit union staff help me improve my finances?

Yes, financial education and counseling are core parts of the member service model at credit unions. Staff is trained to provide personalized advice.

Do credit unions have convenient access like banks?

Credit unions offer online and mobile banking, shared branching, and 30,000+ free ATMs through the CO-OP network. This provides significant convenience.

Will switching hurt my credit score?

No, opening accounts at a credit union will have no negative impact on your credit as long as you manage them responsibly. It may even help your score.

What paperwork is required to switch?

You’ll need to open new accounts and likely provide ID, contact info, Social Security number, and initial funds. The credit union can guide the easy process.

Is it difficult to switch and close bank accounts?

It’s usually a seamless process, especially if you get help from credit union staff. They’ll facilitate transferring direct deposits and automatic payments to your new accounts.

The Bottom Line

For higher interest rates, lower fees, better service, and community focus, this year is a great time to make the switch from a bank to a credit union. You’ll enjoy the same convenient services and products while potentially saving hundreds of dollars annually and supporting a member-focused cooperative. Look for a credit union near where you live or work to find one that you’re eligible to join.

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