Credit Unions 101: Get Away from Increasing Debit Card and Bank Fees

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Photo courtesy of redspotted, via Flickr

We all heard the news late last month that Bank of America would introduce new fees to those who use their debit cards. Well, now it appears the fees-for-debit trend is spreading. In light of all this, record numbers are switching from traditional banks to local credit unions. If you’re interested in making the switch from bank to credit union, or if you’re wondering if it’s right for you in the first place, read on to get a credit union primer.

What’s the Difference?

As BankLady.com explains, the primary difference between a bank and a credit union is the structure of the organization itself. Banks are corporations that have customers, while credit unions are not-for-profit organizations that have members. If you belong to a credit union, it means that you have a stake in it. Any money they earn from your patronage will, in some way or other, be used to benefit you and other members of the organization.

This difference also means that credit unions are smaller than the big national banks. A credit union is only for a specific group, in a specific area.

What the Difference Means for You

This difference in scale might bring with it a number of drawbacks. For one, a credit union will not have as many branches or ATMs as Bank of America or Wells Fargo. If you’re interested in being able to do a little quick banking when you’re across the country or visiting the super market, a credit union might not be for you.

Another minor drawback is that credit unions typically will not have the budget or resources to woo customers with feature-rich smartphone apps and the like. If it’s essential that you have the ability to deposit checks using your smartphone camera, then you might consider sticking with Chase.

This isn’t to say that credit unions are universally inconvenient, of course. Any ATM that belongs to the “Co Op” network, recognizable by a logo on the side, will typically work with your credit union without any additional fees. In my experience, Co Op ATMs are not hard to come by. I’ve found them in police stations, schools, certain other financial institutions, and in every 7-Eleven convenience store, believe it or not.

And credit unions offer many advantages, of course. For one, monthly fees for simply having an account will be a thing of the past. For another, credit-union-issued credit cards will often have lower monthly interest rates and higher spending limits. My credit union also has a very flexible, forgiving policy when it comes to monthly credit card payments.

Some other bonuses: no minimum balance requirements; better, more personal customer service; less painful loan applications; and extra options that are suited to their members’ specific needs. For example, a credit union for teachers might offer special high-interest savings accounts for use during the Summer months when some teachers are on reduced pay.

How to Make the Switch

Unfortunately, most credit unions will not accept anyone as a member. You must first belong to the specific group the credit union aims to serve. If you’re a teacher, veteran, active service member, or some other kind of active or retired government employee, you likely qualify. Many credit unions also offer membership to the immediate family of existing members. If anyone in your family has a uniform somewhere, it might be worth asking them.

There are credit unions that have open membership policies, but the above advantages may or may not apply to them. Credit unions that resemble banks can sometimes behave like banks. As always, it helps to look to the experiences of members.

If you’re interested in finding a local credit union, a couple of locator services might be able to help. A good place to start is CU LookUp. Another popular choice is the aptly named Find a Credit Union.

What are your thoughts on credit unions? Have any good or bad experiences to share? Please let us know in the comments.

Comments (10)

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  1. JayGould

    3 years ago

    BofA’s $5 fee and all of the other new debit fees banks are beginning to charge are in response to the fall in revenues from debit card transactions that are the consequence of the passing of the Durbin Amendment and the subsequent Federal Reserve ruling to limit debit interchange at $0.22 + 0.05% of the transaction amount.

    Those of us who were paying attention to what was happening knew that this was coming and warned against it. Here is one of the things we wrote at the time: http://blog.unibulmerchantservices.com/banks-may-limit-debit-card-transaction-size-to-fight-fee-limit

    What happened was that the government decided that a substantial portion of the banks’ revenues would be collected by retailers. The banks then decided to make up for the shortfall by creating new revenue sources. Is that surprising?

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  2. yourmoneydrawer

    3 years ago

    It will be interesting to see if all the Credit Union switcheroo banter will get any traction.

    I think credit unions are great, but they are different and new members might find some of their limitations frustrating. For example, you might need to hunt for an ATM or not have the slickest online banking system.

    I agree with Jay…new bank fees are kind of our own making.

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  3. ChuckG

    3 years ago

    I had a high school friend whose parents were all into credit union banks. I’ve never had any experience with them. We always used big banks until now. Live in a small town and our bank is just up the street. No fees, no fuss, no mess.

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  4. Allegra.Ringo

    3 years ago

    I belong to the same credit union as pmiller, and I love it! In my opinion, the inconveniences are very minor – I can’t even remember the last time I had trouble finding an ATM- and the benefits are huge. I’ve never felt ripped off by my credit union. Fees are minimal, interest rates are low, and they give you the benefit of the doubt when it comes to things like late credit card payments, overdraft, etc. I’ve been with them my entire banking life, and I feel very lucky, especially in light of the Bank of America news and similar stories lately.

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  5. margotdent

    3 years ago

    I’m going to be switching to a credit union next week! They’ll pay my ATM fees back AND give interest on my CHECKING account, so why the heck not.

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  6. Allegra.Ringo

    3 years ago

    @margotdent That’s awesome!

    I also just found out that November 5th is Bank Transfer Day, so it’s a good time to switch! http://www.cutimes.com/2011/10/14/bank-transfer-day-eagerly-awaited-in-southern-cali

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  7. anazaqz1

    3 years ago

    My wife and I have been Banking with Credit Unions for 35+ years and all has been great. We switched from Washington Mutual to Wells-Fargo years ago but found that both banks were inconsiderat, uncooperative, and arbitrary in their fee and penalty systems.
    We have had none of those problems with credit unions.

    Comment
  8. JohnsonSmith

    3 years ago

    Credit union are pretty catching up at this point of time when many people are totally frustrated about the increase in their debit or credit card fees.Its pretty helpful to seek help form these credit unions.

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  9. innomax123

    2 years ago

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