Deciding between a credit union and bank

The exterior of the DuPont Washington location of America's Credit Union.

The financial crisis and its fallout cast Wall Street banks in a very poor light, and sent many people looking for alternative places to stash their cash. Some turned to credit unions, but at least initially, many found them lacking. Over the last few years, however, credit unions have stepped up their game. This week the consumer website Bankrate released its 2013 survey of credit unions. Greg McBride is Bankrate's senior financial analyst and joins us to talk about its latest findings. He says at the very least people should consider credit unions.

"[Credit unions are] not a one-size-fits-all solution by any means. But I think when you look at how compelling the offers can be from credit unions, we found that more than 70 percent of the nation's largest credit unions offer a free checking account. That's about twice the pace that we see among banks. I think that warrants them being in the conversation," says McBride.

How can credit unions offer free checking? McBride says credit unions are by nature not-for-profit cooperatives. And free checking at many credit unions has been a staple long before it became fashionable among banks. He says even with higher regulatory and compliance costs, credit unions have other levers they can pull before they start instituting fees on checking accounts.

Findings from the survey

  • Half of the credit union checking accounts that Bankrate surveyed have no minimum opening deposit requirement and none of the 50 accounts require more than $100 to open.
  • 74% have no minimum balance requirement, 18% have a monthly fee regardless of balance and the remaining 8% have a fee that can be waived by maintaining a balance of no more than $750.
  • The range of monthly service fees on the accounts is $1 to $10, with $2 and $5 the most common.
  • The range of non-sufficient funds (NSF) fees at credit unions is $12 to $37. This compares to $18 to $38.50 at banks.
  • The most common NSF fee at credit unions is $30, compared with $35 at banks.
  • Credit union fees for debit cards and debit card transactions are rare (present on less than 5% of accounts in each case).
  • 30% of credit unions either do not charge a fee to use another bank's ATM or provide at least one free withdrawal per week.

Average Credit Union Fees
NSF: $26.74 ($26.65 last year)
ATM Surcharge: $2.29 ($2.08 last year)
Fee to Use Other ATM: $1.01 ($0.97 last year)

Average Fees (Credit Unions vs. Banks)
NSF: $26.74 at credit unions, $31.26 at banks
ATM Surcharge: $2.29 at credit unions, $2.50 at banks
Fee to Use Other ATM: $1.01 at credit unions, $1.57 at banks

What advantages can a bank offer?

"The desire to be able to bank, for example, from mobile capabilities is best among the larger banks. That's something that particularly those under age 30 really strive for. I think that's a real competitive advantage. Credit unions tend to be later adopters of that type of technology, but it's still coming," says McBride. "The ability to bank at any time, anywhere and on your own terms -- to the extent that consumers desire that -- are finding that first and most easily at banks. But the tradeoff is that you're often seeing less availability of things like free checking."

As for the availability of ATMs, credit unions have made big strides to level the playing field. McBride says many small credit unions belong to much larger ATM networks and lot of credit unions have become bigger over the years.

About the author

In more than 20 years in public radio, Barbara Bogaev has served as the longtime guest host of NPR’s flagship program Fresh Air with Terry Gross, as well as host of APM’s news and culture magazine, Weekend America and the weekly national documentary series, Soundprint.
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Reality check! At this present time, fewer individuals trust the banks. It happened after the economy went in the toilet and then they turned on their customers with fees. Consequently, numerous people started ditching the banking industrial complicated for credit unions and community banks. Credit union membership hit an all-time high and 2011 and continued to increase over 2012. I think, some of you are aware about this. Moreover, a short term loan will help you pay for your extra bank expenses until you switch to a credit union. Check this out here: https://personalmoneynetwork.com/short-term-loans/

It seems like the credit union or bank decision comes down to low fees vs. ATM availability & mobile/online capabilities. The perfect banking option for both of these sets of services is online banking. Most are free, have no minimum requirements and reimburse you for the majority of ATM fees. Additionally they have extremely low rates & fees since they don't have to cover retail expenses. Also, since they are online they need to be extremely current on all mobile/online capabilities because that's how they do business with their customers. For me online banks are the best of both worlds.

Just to pipe in about my credit union, Educators Credit Union in Wisconsin. This CU comes under the broad categorization: anyone who went to school in Wisconsin is eligible to join. Unlike what was characterized in the story, my CU has always been on the leading edge in offering online banking. I've used it for years (been a ECU member for nearly two decades). Maybe this is because of the size of this particular CU. I find the service exceptional and the rates on things like home and auto loans are comparable or better than the banks. They are also extremely flexible in allowing one to manage one's finances - direct deposits can go in any number of directions: to the mortgage, various savings plans, sub accounts, etc. Very easy to manage online, to pay bills, do nearly everything from my Internet connection. Thumbs up to Educators CU!

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