People are moving ... their money, that is. Last year, Bank of America alone lost 400,000 accounts, according to the “Move Your Money” project.
Where are consumers going? Some of them are leaving for credit unions, which have spiked in membership since the start of 2011.
The fact of the matter is that, in many cases, credit unions do banking better than their big, national counterparts. Consumers may be fed up with increasing fees and decreasing service from big banks, and are looking toward their local credit union for an alternative.
Here are three reasons we think credit unions are gaining on bank membership:
1. Credit unions give you a stake in the company.
When you join a credit union, you’re not just a “client” like you are at a bank. You’re a member and have a share of ownership in the credit union, too; members can elect a volunteer Board of Directors to represent their interest. By definition, credit unions are “member-owned, not-for-profit financial cooperatives,” according to the World Council of Credit Unions (or WOCCU). So not only is your money invested in your credit union, but you are, too.
2. Credit unions can offer better rates.
Typically, credit unions offer the same basic financial products as banks, such as savings, credit and insurance. What sets credit unions apart is that, unlike banks, they aren’t issuing stock or paying dividends to stockholders. Their earnings return to credit union members in the form of lower loan interest rates and higher savings rates. A quick search on GoBankingRates reveals that the top seven highest APY savings accounts are with credit unions, not banks.
3. Credit unions typically have fewer fees.
Soon, banks will have to figure out how to recover their losses after new regulations capping debit card swipe fees will reduce bank revenue. That might mean some additional ATM fees as well as more fees on checking and savings accounts. On the other hand, many credit unions have totally free checking and savings accounts with no maintenance or activity fees, and many reimburse their members for ATM surcharges.
When it comes to some factors, such as convenience and hours of operation, smaller credit unions can’t compete with big banks. Also, some credit unions have specific qualifications for membership eligibility. If you’re looking for wider, national accessibility, a big bank might be your best bet. But if you’re keen on customer service and weary of fees, it’s worthwhile to look into a local credit union.
Want to check out what some people are saying about their credit union? Read through these reviews on Credit Karma to get an idea of what members think.