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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.