Four Reasons to Switch to a Credit Union

It’s just getting downright ridiculous isn’t it? Sure, banks have to make a profit, and they’re still cleaning up the carnage that came from lending money to anybody who walked in with a heartbeat and a pen to sign the papers, but why all these fees? Just when you get used to one fee, here comes another.

Obviously, recent legislation (Dodd-Frank) played its part in motivating banks to add new fees, but since we can vote with our feet (and our dollars), I think it is time to look at alternatives to large banks.

For some reason, and who knows why, there is a sector of banking institutions that just can’t get the love and respect they deserve – credit unions. In the past, you used to have to meet a specific criteria in order to be a member, but now the membership requirements are about as strict as, “you have to drive by our branch at least once a year.”

I’ve been a member of a credit union for nearly 15 years now – since I was old enough to join one based on my grandfather’s decades-long membership during and after his service in the Marines.

I’ve financed vehicles (back when I used to do that) through my credit union at incredibly low rates. I have enjoyed higher yields on CDs and money market accounts, and even turned to them for a mortgage – mostly because they were so easy to deal with and the rates were competitive. I still maintain a local bank account with a small, regional bank, mostly for convenience, but I do all “serious” banking with my credit union.

Some credit unions have more strict criteria based on geography, membership to a particular organization, employer-based, etc. However, chances are virtually anyone can now join a credit union – and here’s why they often make for the best personal bank account.

Four Reasons to Choose Credit Unions Over Big Banks

1. Free Checking. Fat chance of finding a bank that has totally free checking these days. Although there are crafty ways of avoiding checking account fees, no bank is going to tell you that. Most credit unions still have totally free checking account for members.

2. Free ATMs. Most credit unions belong to networks within the National Credit Union Administration or NCUA. If you go to any credit union that is part of this group, you will often receive no fee ATM transactions. It doesn’t always work out like that, but even if you do pay a fee, it’s going to be a lot cheaper than traditional bank fees.

3. Better Interest Rates. Credit unions are non-profit. When you join a credit union you have to pay in to it as a shareholder. It’s only about $5 that you pay as your “share,” but that $5 makes you an owner of the credit union and because of that, you’re entitled to benefits. Credit unions often have better rates on loans, and better interest rates on deposit accounts.

4. No Strange Fees. If you’ve taken a large amount of cash in to a bank lately, you’ll notice that they charge you for the deposit. Isn’t that kind like McDonalds charging you to purchase lunch, and then charging you for the food? If it seems silly, it is, but that’s the new normal with banks. Credit unions have also been affected by legislation and have beginning to hop on to the fee bandwagon, but not with outlandish fees like this.

Potential Drawbacks to Using a Credit Union

If you’re a “techno banker,” credit unions may not be your cup of tea. Their internet banking platforms aren’t nearly as robust as traditional banks, and you may feel like you’re looking at one of those old school blue screens when using them. They also don’t come with all of the transfer capabilities or other advanced online management tools.

Still, if you’re fed up with the big banks, there’s an option, and that option is the credit unions. I would encourage you to head over to the NCUA website today and find your nearest credit union to investigate their offerings and strongly consider making the switch.

How have your experiences with credit unions differed from those with a big bank?


  1. We love our credit union. Yes, it’s free checking, though we have to pay for our checks. We buy them ourselves from online sellers that are about 25% of the price. We love the “no fees” at our CU, and they still give personal service. We have not found them to be very competitive on mortgage rates/refi rates, but that varies with the credit union. Overall we’re very happy with our CU. Highly recommended!

  2. We love our credit union. It’s called “First Tech Federal Credit Union” so as you can imagine, it doesn’t seem to fall prey to the one drawback you list.

    • My credit union has made some recent upgrades in the tech deparment, too, and I have been pleased. I was mostly echoing a complaint for others that use credit union or small bank sites and gripe about the lack of features.

  3. If you are a “techno” nerd you can always switch to a online bank like Ally or Charles Schwab. I’ve been with Charels Schwab for a while and I love them. They give me free checks, free ATM, free investment advice, free debit card usage, no fees and there is always a professional finance person I can talk to if something goes wrong. I ditched my brick and mortar bank just in time for them to start charging everyone else fees. I’m glad I did!

  4. I’ve been a member of the Qantas Staff Credit Union here in Australia for nearly 20 years. As you’ve mentioned, no/minimal fees and an outstanding online service are both big draws, but more so the real sense of personalised customer service I receive on the very rare occasion I’ve had to phone in with an enquiry; nothing has ever been too much trouble. I simply can’t imagine anyone wanting to do business with a big bank once they’ve spent time as a member of a credit union.

  5. I have been a credit union member since 1973. The only shortcoming to credit unions is sufficient branches. I can use another credit union branch to access my fund. It is not really convenient.

  6. I have been with the State Credit Union since 1980 when I was able to open an account based on my parents membership. Not only is is economical, but I have gotten suberb personal service and the tech features are improving everyday. Our CU also does a whole host of things to give back to the community and State at large and it has been very uplifting to see the good work being done. I served a five year term on the Advisory Board at my local branch and learned even more great things that went on ‘behind the scenes’. I don’t know why EVERYONE who qualifies isn’t a member of a CU.

  7. When I heard of the news that customers will be charged when they use their debit card on other merchant stores, I could not understand why. So, I immediately withdrew all my money, closed my account with them, and transferred it to other bank. I have been reading about credit unions lately, came across several posts on different blogs. So far, I am getting positive feedback and half-convinced that I should open an account with a local credit union. Maybe not my entire savings, just a part of it , to see how it works and if it will fit my lifestyle.

    • They are charging fees because of the Frank-Dodd finance bill that the democrats passed.

      But the big question is why would you ever use a debit card?
      – more liability than an ATM card (see what happens if it is stolen)
      – no float on the back of the bank, immediately withdrawn from your account.
      – no benefits and perks like good credit cards offer, I get 2% cashback on everything that I buy with mine.

      Credit Unions have their own problems – look at all the services you may need before you waste your time to open and then close an account. A great online-only account is USAA.

      Good luck!

  8. I’ve belonged to a credit union in the past but find that there aren’t many options in my city with branches within walking distance of my home. Instead, my husband and I do most of our banking at a small, local bank (with 4 branches) and I’ve found the experience is similar to a credit union.

  9. USAA is a very good alternative – and I think they are opening up their membership, not just to military, veterans and their families. Their billpay is on par with BofA.

  10. When people ask me for financial advice I tell them to only use the largest money-center banks. I can wire money from my laptop in China while I have to fill out forms at a CU (after they get the supervisor’s supervisor). I deposit checks from my cellphone and get the best currency exchange rates – credit unions don’t have the resources for these. I have a zillion stories of systemic problems of CU’s from my wife who had several accounts at CU’s for decades – until I pointed out that their savings account was charging her more in fees than they were paying in interest; she was losing money every month in their savings account!

  11. We are making the switch right now. I agree, I am done with the big banks paying execs big bucks with big bonuses, getting billions in bailouts and still passing on costs to us.

  12. I have recently started using a credit union and have found it very refreshing,Iam a techie but nice to go back to basics sometimes.

  13. No one credit union is the same. Not all of them have limited online banking and mobile banking services. Some credit unions technical services are just ad advance as the big banks and other credit unions are investing in these services. You just have to shop around and find the right credit union for you. Also, if the credi unions join that is part of the CO-OP network you actually have access to more ATMS than your current bank.

  14. Credit Unions in Britain are different animals, I believe. They are much more geared to helping people whose idea of saving is like £1 a week or something (better than nothing). It’s more an alternative source of lending to loan sharks or for people that banks won’t even talk to. Credit Unions in the US are big businesses in themselves, where as those here in Britain tend to be extremely local enterprises. Worth looking into, though, if your financial situation is more towards the lower end of the scale.

    • Scale of the Credit Union is based on the Field of Membership (i.e., who’s eligible to join). I agree that PenFed (Pentagon Federal the CU) or Navy Federal are ginormous behemoths, more like banks than their smaller cohorts. However, there are many much smaller CU’s in the US.

  15. I’ve been using Navy Federal Credity Union for the past 18 years. NFCU is open to all military, veterans and their families. I would not bank anywhere else. Not only is a my checking account free of fees, its also earns interest! Mind you the rate is low but apparently from what I’ve been reading in PF forums this is not common. Oh and no problem with it being high tech. Their online options are great- web bill pay, online transfers between accounts (to include direct payments to credit cards and loans that you hold with them), you can even deposit checks online with them. NFCU has to be online savvy when you realize that thier clientele (military) are stationed all over the globe and having a branches nearby just isnt feasible.

  16. I recently resigned from a position with JP Morgan Chase Bank, absolutely fed up with the way that they treat customers like flashing dollar signs. Every time a customer stepped into the branch, we were forced to treat them like a piece of meat to be skewered, fried and served. It’s all about acquisition and large banks don’t care about their customers, no matter what you hear otherwise. My husband and I are moving to USAA for the convenience of no ATM fees.

  17. Has anyone tried internet only banks? I hear they got great savings account rates and with some, like Ally, you can use any atm in the country and they reimburse. I was wondering how accurate and fast is that check scanning and internet depositing?

  18. I looked into the Credit Unions in Denver and I researched the salaries and compensation of the executives from the 1099 forms that can be found on To my dismay the CEO of these ‘non-profits’ are being compensated $500K + per year. The rest of the execs get around $300K + per year. I bet a teller makes $10/hr. SO TIRED OF CORPORATE GREED EVERYWHERE!

  19. Thanks Jason for your informative article on Credit Unions. I wasn’t familiar with many of the benefits of pursuing this path.

    The sub-par technology of most Credit Unions is a good point. Honestly it concerns me. Here’s why:

    Automation is a foundational element of an effective personal finance system. If you can’t easily set up automatic transfers, automatic bill pay and automatic savings contributions you should think twice about pursuing a Credit Union.

    Some people are financial experts. They should go Credit Union. Most others however are still putting together the pieces and don’t have the skills and tools they need to deliver on their financial goals. They need easy automation systems and transfers. These people should be wary of old school Credit Unions.

    Think about the cost side of it.

    Traditional Bank: Maybe $100 – $200 of additional fees per year following the Dodd-Frank legislation.

    Credit Union: Lower fees yes, but you have an increased opportunity to make costly mistakes. You may miss making automatic contributions to your savings account for a few months. Or you may miss paying bills for a cycle. These mishaps could end up costing you hundreds of dollars.

    Fees should always be avoided. No question. However be honest with yourself. Ask yourself, do you always sit down every month and:
    – pay bills
    – contribute to your retirement fund
    – transfer money into a savings account

    For the majority of people in this world (myself included), the answer is no. So go with automation. Go with a large bank with up to date technology. All of these major decisions will be automated and mistakes will be avoided.

    Jason does offer a good suggestion in his article that get’s around a lot of what I describe above. Go with a Credit Union for large transactions/account holding and reserve an account with a regular bank for more day-to-day smaller transactions.

  20. My parents have credit unions to be quite useful and claim they are making a comeback. Could be part of the solution, especially in rural america.

  21. May I have the pleasure of adding one more great reason to join Credit Union…? Credit unions are non-profit organizations. They are there to help you manage your money without being vultures making a profit off one’s hard earned money! My DH recently realized how he was nearing retirement, that the banks are not the old-fashioned grandma and grandpa banks where one’s hard-earned savings are penalized making the big profit bank vultures rick off of it…Instead, as nervous as he was, not knowing the language of the ‘new’ and ‘massive’ banking options, that his Credit Union actually help him organize and explain in simple terms the accounts he needs to manage his retirement funds. Was he pleased and happy he understood and decided on the options to manage his funds (not a lot, but enough to retire and get by on somewhat comfortably).

  22. Couldn’t get me out of Navy Federal Credit Union and back into a regular bank with a forklift and a crane. Over one million people moved to credit unions during the year 2011. I’d love to see that double in 2012! Make the move, don’t let big banking victimize you or terrorize you into staying any longer!

  23. i can’t find a credit union near my house. I had to open a free checking account with PNC bank in Philadelphia. PNC has many free ATMs in Pennsylvania. Bye