Should You Use A Bank Or A Credit Union?

In 2011, Chase said it would put a $5 monthly fee on debit cards. As a result, a day was created called National Bank Transfer Day, where people were encouraged to ditch big banks and shred their credit cards.

What happened

What happened is that millions of people did just that and in the past year alone, credit unions exceeded $1 trillion in assets. Maybe you were one of the people who made this move. If not, you might be wondering whether it would make sense or whether you’d be better off sticking with that big bank.

The advantages of a big bank

One of the biggest advantages of a big bank is accessibility. They usually have more branches and more ATMs. Some are even open weekends. For that matter, we have a bank where I live that’s open seven days a week and has branches in the supermarkets where we shop. No credit union I’ve ever heard of could top that.

Credit unions have their strengths

Credit unions are designed to serve local constituencies and are rarely available outside their local areas. Most have no ATMs except for one near or inside its offices. However, most compensate for this lack by reimbursing customers for ATM fees when they’re “out of network.” So, if you belong to one of these credit unions, you could use just about any ATM anywhere for free. Most also offer options for mobile banking. If yours does, you could use it to find ATMs in your area. Unfortunately, some credit unions cap how much they’ll reimburse for ATM fees – generally about $15 a month.

Account fees

Banks are notorious for loading fees onto checking accounts. These can be anything from monthly “maintenance” fees to overdraft fees. In face, according to one report I saw recently, the average monthly maintenance fee on checking accounts has grown by $0.18 to a total of $12.26. They’re also tough on overdraft fees and have actually mis-ordered transactions so that their customers had overdrawn their accounts without even knowing it. Plus, many now charge fees for using out-of-network ATMs, which average $2.60.

The winner

In comparison, credit unions are typically smaller operations, are owned by their members and pass their overheard savings onto them, which translates into fewer fees. In fact, more than 70% of the big credit unions offer totally free checking. On the other hand, only 39% of banks do. Credit Union overdraft fees are $20 to $30 and even those that do have monthly maintenance fees charge only from $2 to $5. So in terms of checking account fees, credit unions are the clear winners.

Customer service

Credit unions generally offer higher-yielding checking and savings accounts than banks. Big banks are doing better in terms of customer service, scoring a 77 on the American Customer Satisfaction Index. While credit unions have historically done better in customer service, they’ve slipped a bit recently. As they’ve been swamped with new customers, their satisfaction ratings have slipped 5.7% to a score of 82 but this still puts them tops overall for banking services.

Hard to beat

Big banks may have flashy commercials and a huge array of products but in general, credit unions are hard to beat. Most financial experts say that if you can get past the lack of ATMs and physical branches, that they’re the best alternative for banking today. If you look just at their fee structures, it’s probably worth opening a savings or checking account at one of your local credit unions. Plus, you’ll likely get more and better personalized services. However, if credit products are very important to you, you might be better off sticking with that big bank.