Saturday, November 5, 2011

Are Credit Unions Really Any Better Than Banks?

I've had a credit union account for over 21 years. With Bank Transfer Day upon us, many people will be moving their money out of big banks and into smaller credit unions. I am certainly no defender of banks. In fact, I have a saying that "There are no good banks, just some that are less bad." But I am not willing to give credit unions a free pass just because they are not-for-profit. I am simply not convinced that credit unions are any better than banks.

I regularly publish the money market interest rates of several financial institutions. There is one credit union on my list: Western Federal Credit Union. I have maintained an account at Western FCU (and at it predecessor credit union) since 1993. Regrettably, in my updates going back to 2008, Western has consistently scored in the lower half of the financial institutions that I track. This is certainly not a convincing argument for Western FCU.

In order to provide some additional points of comparison, I added a couple of credit unions that advertise quite heavily in my local area: Travis CU, and Patelco Credit Union. A bit of history: Patelco is the credit union for the company currently called AT&T (formerly SBC (formerly Pacific Bell (formerly Pacific Telesis Group (formerly Pacific Telephone Company)))). Thus, the name Pa-Tel-Co Credit Union. Anyway, I've digressed. So, I compiled an interest rate list for these credit unions, and a few selected banks.

0.89% Ally Bank Online Savings
0.76% EverBank Yield Plus Money Market
0.45% Western FCU Money Market
0.10% Citibank Savings Plus
0.10% Travis CU Flexible Money Market
0.06% Patelco CU Money Market Account

The two new credit unions are approximately on par with Citibank! And Citibank is pretty much at the bottom of the heap as far as banks are concerned. I realize that interest rates alone are not the only comparison point. There are, of course, customer service issues and fees. Thankfully, I am very careful about the types of accounts that I open, and have been able to avoid bank fees.

As far as Western FCU is concerned, I still have a sizable balance with them. However, they did close the one branch near my home (the next closest branch being a 30 mile drive away). And, they can be just as inflexible as the big banks on some matters.

But to sum things up, I am not particularly loyal to any bank. I will transfer my bank funds to a credit union if somebody can show me a credit union that I'm qualified to join, and has savings rates as high as Ally Bank, or branches that are as convenient as Citibank. In the end, I guess that I won't be transferring my money today after all.

DC

7 comments:

"Coach" Mark Hoaglin said...

If your main criteria to pick a credit union is high money market or CD rates then good luck. The more important question is, "What are you trying to do with your money?" Many credit unions like Patelco have FInancial Advisors who can counsel you on geting from where you are now to where you want to be with your money. Patelco Financial Advisors also offer CDs from other financial institutions. It's all about the relationship. Good luck with your search!

pfstock said...

Coach: Thank you for your comment. Currently, there is a lot of public anger directed toward banks. Not all banks are that bad. But, my point is that readers should not automatically assume that moving their money from a bank to a credit union is the best solution.

In my case, I was a member of a smaller credit union that was acquired by Western FCU. They closed my local branch, and invalidated my unused checks due to the name change. Frustratingly, they've refused to waive my check printing fees even though the reason for I needed new checks was because of their merger.

I considered joining Patelco CU a few years ago. I hesitated because (at the time) Patelco did not insure its member deposits with the NCUA (National Credit Union Administration) and opted for private insurance instead.

So to me, credit unions have not been better than banks in many ways. Unfortunately, I have not found a credit union that is competitive with better banks.

Forex Broker said...

I have worked for a credit union for 32 years. Many things have changed in that time but I still think credit unions offer the best rates both for saving and lending. Two other family members work for banks so we compare the two. Our credit union has seven branches and we pay a lot in property taxes and other taxes. We may be not for profit but we have to offer the same services with less income to pay for them. We are still for the little guy the banks don't want.

Penny Stock Blog said...

Why not a non profit banking company to make small business loans. Because its illegal ever heard of such a thing. Why because goldman' bank of america and all the other mega financial institutions want nothing of the sort. Wallmart wanted to have a bank of their own for other reasons of course but they can not get a charter from the federal goverment to run their own bank. The financial interests are just to powerful.

2million said...

I moved to a credit union about 5 years ago for my primary accounts and have been very pleased with them so far. There rates have been better than other local banks, but like everything you need to compare rates/prices regularly to ensure your getting the best deal.

peg42 said...

We have both a small bank account and credit union account. We moved into the credit union account about 4-5 years ago when the bank was offering such low interest rates and high fees. Granted, the CU interest rates aren't that great, they still are better than the bank offers. I feel the CU also offers better personal service as compared to the bank, which I value. Yes, I feel that the Credit Union is better.

QUALITY STOCKS UNDER 4 DOLLARS said...

Give the little guys a chance.