The Benefits of Credit Unions over Traditional Banks

The banking crisis is wonderful news for credit unions. Credit unions are happy because the crisis hasn’t touched their banking services and more people are recognizing the usefulness of having their banking and investing needs handled by credit unions.

Credit unions are providing bigger yields with lower fees and having no trouble appealing to new members. Many are also positioning themselves in the media as being more wholesome than banks or the Wall Street giants. Negative connotations with bailouts, bank confiscations and failures, mortgage scandals and other things have made banks a four letter word. Credit unions have seized upon this opportunity to allow the public to know they are trustworthy and offer great services for their customers.

Credit unions are realizing an increase in the growth of their customer base in the last several years. Credit unions portion of the U.S. household total market climbed by 10% during the month of March of this year, according to one of the leading financial journalism sources in the country.  They have grown from last year this time or the same month by nearly 1%.

Credit unions aren’t for everyone. However, if you have the opportunity to become a member many advise that you will not regret your decision. Personally many customers that have made the switch feel that credit unions offer customers more personalized service and spend more time with their customers than many traditional banks.

Credit unions have not escaped the mortgage crisis entirely. A lot of credit unions are seeing high loan losses and several different types of credit unions saw extremely large losses in their securities that are mortgage backed which prompted a government bank bailout.

Deposits and investments

With credit unions members can expect to find higher interest rates for their low risk investments. These investments include certificates of deposit and other low risk investments as well as checking and savings accounts that are also found with many traditional banks. In May of this year the average interest rates for one and five year CDs or certificates of deposit at credit unions were higher than what any bank or thrift in the country could offer.

Credit unions are more prone to provide their members or customers with free of charge checking services when most banks are facing regulation changes that will cut into their profits gained from overdraft fees which is one of their most profitable sources of income. With many regulatory changes expected to come into play for banks affecting their fees, it’s going to be a really affect the customer base for many credit unions that are able to offer customers less fees for more services. Currently of the 50 largest credit unions, 39 offer their customers free of charge checking accounts.

Credit unions are also offering reward checking accounts for customers that are making a certain number of debt card transactions and direct deposits along with getting their statements online instead of in the mail.

Mortgages loan services

Credit unions are lowering their rates as they enlarge their services into novel areas that include loans for college students along with small business loans.

Pentagon Federal Credit Union has a 5/5 mortgage with adjustable rates for members, which offers a 3.88% rate for 60 months and then adjusts each consecutive five years without origination fees for the borrower. In addition, a majority of the lenders fees will be covered. One credit union, Interra Credit Union, has indicated their mortgage activity for loans has increased.  The credit union is offering customers that use their mortgage services will receive a $250 cash Visa gift card if they purchase or else refinance their mortgage with the credit union.

Generally the rates for primary mortgage are identical for credit unions and banks due to the nation’s mortgage loan secondary market playing such a large part in mortgage loan rates and their obtainability. Closing costs for mortgages are much more apt to be lower with a credit union than most traditional banks.

Home equity lines of credit are an alternative which may find the home owner a better deal with most credit unions than through banks. In May, the typical rate of interest for most home equity lines of credit was under 4.5% for credit unions and almost 5.7% at most traditional banks.

Credit cards and car loans

Credit unions will generally provide a better deal for car loans than nearly all traditional banks. The month of May saw credit union interest rates for car loans at an average of approximately 5.7% for their four year new car loans. Banks were delivering their interest rates at almost 7% for a similar car loan of the same duration of time.

Credit card business has not been ignored by credit unions. Many cards have variable rates, which means rates are moving higher once the market rate moves up or increases. Some credit unions still offer a fixed rate and have launched more no fee reward cards. Navy Federal Credit Union has recently offered a no fee card offering 1% cash back on the first $10,000 spent each year and 1.5% for all charges after the first $10,000.

Other credit union fees that are lower than most banks are those for credit cards. A recent survey unveiled that the cash advance along with balance transfer fees are increasing. Some of the fees are up by as much as 5% more for each transaction. Only about 50% of credit unions charged these types of fees and in cases where they are charged, they have remained the same according to recent Bankrate survey.

Interra Credit Union has a Platinum Card that has a fixed rate of interest along with their cash advance fee at an interest rate of almost 9%. The late fee of just under $20 is charged if a credit card user is exceeds 10 days past the due date. When you compare this fee to typical bank issued cards of $39, the credit union card is saving you more than half of what the bank charges.

It is important to check the financial health of any institution that you would like to do business with, including credit unions. Although overall they are safer than banks for a lot of reasons historically, you never know what the future may hold for the financial industry overall.