As the threat of increased interest rates wages on, consumers continue to look at the best places to bank. Credit Unions are an natural alternative. According to statistics from the Credit Union National Association, not-for-profit institutions have gained 1.3 million new members last year to reach a record high of total members.
With more than 7,000 credit unions in the United States, CU’s vary in size and services, according to the National Credit Union Administration. While there are plenty of perks to joining a credit union. The Motley Fool considers the pros and cons of banks versus credit unions.
Report from The Motley Fool:
There are some obvious differences between doing your banking at a credit union as opposed to a traditional bank, and each option has its own pros and cons.
For example, credit unions tend to pay higher interest rates on deposit accounts, but usually can’t match the convenience and features of big banks. We asked three of our contributing writers to share their preferences. Here’s what they had to say:
Selena Maranjian: When it comes to interest rates, which are a rather critical factor in our banking needs, credit unions have the advantage. Of course, not every credit union will top every bank, but as credit unions are not out to make big profits, as most banks are, it shouldn’t be surprising that they will typically offer you the better rates — higher, when you’re looking to save money, and lower, when you’re looking to borrow.
The table below offers some examples of national average rates as of June 26, 2015. It’s from the admittedly not-so-objective National Credit Union Association, but as the NCUA notes, “SNL Financial, an independent company that tracks interest rates and terms at financial institutions nationwide, is the source of the data for these charts.”
Indeed, of all 23 products reviewed, credit unions had the better interest rate in 22. The only exception was for 15-year fixed-rate mortgages, where banks and credit unions were tied. The differences were starkest among loan rates for new and used cars, with bank rates close to twice as high as those of credit unions.
Over long periods, small interest rate differences can add up, saving you hundreds or even thousands of dollars. That’s an excellent reason to consider doing business with credit unions.
Matt Frankel: Selena is absolutely correct that you’re likely to find a lower interest rate on certain types of loans, as well as better rates on deposit products such as savings accounts and CDs. However, there are a few reasons big banks could be a better choice for consumers.
First of all, I’d be willing to say that most consumers don’t really care about the higher savings interest rates. After all, who actually relies on savings interest for income these days? However, I do concede that this could become a bigger drawback to banks once rates rise.
Second, because the banks charge more on loans and pay out less interest, they tend to have more resources to invest in developing the latest banking technologies. Many credit unions have mobile banking apps, but for the most part these have just basic functionality.
In contrast, big banks have the ability to develop and offer some pretty useful features.