In days of old when I was much less informed in financial matters (not that I’m a financial whiz now, but I have improved a little), I used to think credit unions weren’t real “banks” or weren’t as good as banks — sort of like community colleges vs. universities. Well, in a way I was right in that they are not “banks” and they are not as good as banks — they are better than banks.
When we moved to our current hometown, located 40 miles from the closest Bank of America branch, we started researching local banking options of which there are three: 2 banks and 1 credit union. I visited all three websites and compared the account options and noticed that while the 2 banks charged monthly fees for checking accounts, the credit union didn’t. This led to a little research of banks vs. credit unions, and this is basically what I learned:
- Credit unions are not-for-profit organizations (and banks are for-profit organizations)
- Credit unions are “owned” by all of its members (anyone who holds an account and deposits money there)
- All credit union earnings after taxes and expenses are returned to the community by way of low-interest loans, higher dividends, and low-fee or free services
- Funds deposited in credit union accounts are insured by the National Credit Union Share Insurance Fund (NCUSIF), a federal government agency
After learning the above, the logical choice was to go with the credit union instead of one of the banks. After all, why pay monthly fees for a checking account when you can open a free savings and checking account at the credit union and earn more interest? The only requirement was a $25 non-withdrawable deposit as long as the savings account is open, and that $25 is eligible to earn dividends.
Our original plan had been to deposit our checks in a local bank and then transfer the funds electronically to our Bank of America accounts. We opened our credit union savings account with $25 in the beginning of June 2006. On June 30th, we received our first quarterly dividend and found that we had earned $0.84 on about $1,000 in that first month. That was almost 10% of what our Bank of America savings account had earned us in one year with a much higher average balance that we immediately changed our plan, closed our Bank of America accounts, and moved everything to our credit union savings account.
We now put everything in our saving account and transfer what we need to our checking account to pay our bills a few times a month, leaving the funds in the savings account for as many days as possible. (Read our article for tips on optimizing your earnings.)
We have been with our credit union for almost 2 years now and have never regretted it. Here is a comparison of our experiences with our credit union vs. our prior experience with Bank of America:
- Customer Service is always friendly and truly helpful. The tellers don’t mind spending time answering or making an effort to find answers to all your questions. Whenever I email our credit union with questions, they respond promptly with a personalized and relevant message. With Bank of America I often received form letters that didn’t address my questions at all.
- Because it’s not-for-profit, our credit union never tries to sell us anything. When we were with Bank of America, their telemarketers were constantly calling to try to get us to sign up for services we didn’t need. They once called and spoke to my sister about services for one of my accounts, and even though she told them that it was not her account and she was not authorized to make any decisions, they went ahead and signed me up for a service anyway. They charged me for that service for 2 months in a row before I was able to get them to cancel the unauthorized service, but I never did receive a full refund of those charges despite several requests.
- We can visit the teller as many times a month as we need to. At Bank of America, we were only allowed 2 teller visits a month and additional visits would incur charges. I know you can make deposits at ATMs, but we just weren’t comfortable sticking large checks into a machine out-of-doors. In any case why should you have to pay to go deposit money in the bank when you’re already paying for your account and they’re making money just by taking your money?
- In our first year with our credit union, our savings account earned over 6 times the amount of interest than we had with Bank of America.
I don’t know if all credit unions are as good as ours, but I’m sure that for the most part they must be better than banks, because the #1 priority for banks is to make money, while the aim of a credit union is to help support the community.