Did you know that there are over 4,800 federally-insured credit unions in the US and that more than 130 million Americans belong to a credit union? Given these stats, you may be wondering about the pros and cons of credit unions and if membership is right for you.
As a savvy consumer, it’s important to tease apart the facts and figures to see if there’s truly a compelling case to be made for joining a credit union. In this post, we’ll examine several aspects of credit unions — so you can bulk up on the information you need in order to make a sensible decision for your personal circumstances.
So, get comfy. This is going to be a comprehensive look at credit unions’:
- Upsides, such as better rates, more favorable terms, superior service, and fewer fees.
- Downsides, like more limited accessibility, finite eligibility, and narrower product and service portfolio.
Understanding Credit Unions & Banks
When evaluating credit unions vs banks, it’s helpful to have some foundational knowledge on each. Here’s quick overview of what they are and how they compare:
Banks vs Credit Unions
|# in the US
||4,800+ (21+K branches)
||4,500+ (71+K branches)
|# of US Customers
|Assets Under Management
|Regulation & Oversight
||National Credit Union Administration & state regulators
||Federal Reserve & the Office of the Comptroller of the Currency
|Eligible for Federal Insurance
||Usually local or regional
||Can be local, regional, national, or international
(restricted by eligibility)
|Public or private clients
- Being trusted and secure financial institutions
- Offering better customer service
- Community participation & support
- Supporting & shaping the economy
- Ability to provide liquidity and a broad range of offerings
- Safeguarding depositors’ money
As you can see, banks and credit unions have some similarities and some differences.
Both are subject to national and state laws and supervision. Both can federally insure deposits. Both can serve the towns they’re located in.
However, it’s clear that conventional banks occupy more of the financial landscape in terms of number of businesses, locations, and money in their vaults. Meanwhile, credit unions are more associated with forging deeper personal connections and being organizations members can count on.
Advantages of Joining a Credit Union You’re Bound to Love
No matter how you look at it, credit unions are popular — and for good reason.
But, should you get on the credit union bandwagon? Well, let’s touch on some things credit unions have going in their favor so you can see some of the mega benefits of joining.
Lower Interest Rates & Fees
Because credit unions are nonprofits and member owned and operated, they aren’t incentivized to crank up the rates and fees you have to pay to borrow or deposit money. Credit unions don’t have external shareholders to whom they must show — and pay out — profits to.
As such, credit unions are willing and able to slash the interest rates on loans and ask for fewer and smaller fees for things like applications. In fact, some credit unions will even waive fees in certain situations.
Higher Savings Rates & Dividends
This is the other side of the coin. With no outside investors with their hands in the pot, credit unions are able to reward their own members. This comes in the form of higher interest rates on deposits in savings, checking, and investment accounts. Plus, some credit unions — like VCU — pay regular periodic dividends to account-holding members.
More Favorable Terms
Sometimes, it’s not just the amounts of money that are meaningful. The conditions and contexts surrounding it can have a big impact, too.
Credit unions are often a greater liberty to be flexible and accommodating. For example, credit unions have been known to:
- Modify the repayment schedules for loans (e.g., changing the number or frequency of installments)
- Be more willing to accept members or loan applicants than traditional banks, making financial services and product more accessible to more people
Customer Service & Community Focus
Here’s one area in which credit unions really shine.Year after year, customer satisfaction surveys show that crest union members tend to be happier with their financial institutions than their bank-going counterparts.
This may be due to the personalized attention and genuine support many credit unions offer. As community organizations, it’s likely that credit union staff are part of and active in their communities. So, helping members can seem like assisting family, friends, acquaintances, and local small businesses.
Safety & Security
There are a few different angles to explore here. In customer polls, credit unions are routinely touted for their trustworthiness and the sense of security their members feel.
- This could be because members enjoy an elevated level of service.
- It could also be because, for various reasons, credit unions tend to be relatively stable organizations. They’re less likely to go bankrupt and more likely to weather economic turbulence.
- On top of this, eligible deposits at credit unions are federally-insured.
Possible Disadvantages of a Credit Union
You can’t make a sound decision to move forward with credit union membership without being aware of some of their potential shortcomings.
To be clear, every credit union is different — so we aren’t saying that the disadvantages listed below apply across the board. In fact, many of the “negatives” you may have heard about are outdated, false assumptions, misrepresentations, or simply not true.
Limited Availability & Accessibility
While credit unions are in more and more communities, it may be that there aren’t any in your area. Or the ones in your neighborhood aren’t a proper fit for you. If this is your situation, you may strike gold by looking a little further afield or considering an online credit union.
You may also think that being a member of a local credit union means you’re restricted to just its branches. This may not be accurate. Many credit unions belong to geographically-dispersed consortiums, which essentially means they share some resources so that members of the participating credit unions have access to services across the whole network. VCU is part of a credit union co-op so our members can use over 5,400 branches and 30,000 ATMs around the world.
Another challenge you could encounter relates to accessibility. It’s possible that some credit unions aren’t equipped to fully serve certain populations, like differently-abled or underserved people. For example, maybe a credit union doesn’t have a website that meets current accessibility guidelines so that folks with visual impairments can use online banking features. Or perhaps the local branch isn’t on a bus line.
There may also be a misconception that credit unions keep unusual hours. However, most keep standard business hours (or “bankers’ hours at the very least!).
This is a legitimate point. Credit Unions are membership-based organizations. And membership is only granted to those that meet certain criteria — like occupation, employer, region, faith, etc.
That said, the odds that there’s a credit union you could join are very high. 99% of all Americans qualify. The key is to find a credit union that aligns to you and your particular profile.
Mainstream banks may have more products and services or bells and whistles. (For instance, instead of 10 kinds of checking accounts, maybe they have 15.) They have the scale and capacity to build out a menu of offerings that smaller financial institutions can’t.
That said, credit unions often choose to specialize and only offer products and services that they know meet the demands of their members. By way of example, a credit union that serves a lot of families may have more options for home, auto, and student loans. A credit union whose membership is largely entrepreneurs and start-ups might feature more corporate credit cards and business loans.
Technology & Services
Most credit unions are rather small enterprises whereas banks are usually bigger. With size comes advantage…sometimes.
Banks could have more budget for online support, online banking, etc. This doesn’t mean that credit unions won’t have good tech and services, though. Most credit unions are keeping pace with modern norms when it comes to encryption, online and mobile banking, online bill pay, teleservices, and so on. It’s worth investigating what the credit unions you’re considering offer and the standards they meet for data security and privacy.
The Value on Joining Valley Credit Union
Picking the right banking partner is not a choice to be taken lightly. Understanding the merits, and possible detractors, of credit unions can help you make a wise and well-informed decision for your needs and preferences.
There are so many stand-out benefits of belonging to a credit union. For most people, the advantages far out-weigh the potential disadvantages of a credit union.
We encourage you to take an even deeper look into what makes VCU special. If you have any additional questions, our talented team is ready to help you. Otherwise, we hope you join the ranks of VCU’s many delighted members.