If you want to break up with your bank, it’s a good idea to pump your breaks before moving over to a credit union. While it’s true that credit unions rival banks by charging fewer fees and accommodating their customers’ needs, they have their flaws too. Before you officially make the switch, it’s a good idea to consider what you could lose by deciding to bank with a credit union.
1.Mobile Banking Might Be Limited or Unavailable
Credit unions are more technologically savvy than they used to be. Today, many of them allow their clients to bank online and a lot of them have banking apps as well. That’s not the case everywhere, however.
When you have an account with a big bank, you’re guaranteed to have the option of banking on the go. With a credit union, you might have to do some extensive research to compare accounts and find out what services they offer. Credit unions only serve certain groups of people and if the ones you can join don’t have mobile banking or their apps aren’t up to par, that could potentially be a major disadvantage.
2. Fees Might Not Be as Low as You Think
It’d be wrong to assume that all credit unions have low-fee checking and saving accounts. There’s proof that credit unions have raised their overdraft fees, in some cases morethan banks have.
To stay on the safe side, it’s best to inquire about fee schedules and policies before settling ona credit union. You don’t want to be surprised with a penalty or a charge that you didn’t see coming.
3.Credit Card Rewards Might Be Limited
For some credit card holders, it’s all about the perks. Having the opportunity to earn cash back, miles or points can help consumers save big and achieve goals – like travelling to multiple countries – that would take longer to accomplish without their card rewards.
Much like traditional banks, credit union credit cards offer rewards. But they’re usually not as helpful for customers. If you’re planning to use your rewards to score major discounts on hotel rooms or plane tickets, you might be better off sticking with a credit card from a bank.
4. ATMs and Branches Might Not BeConvenient
Convenience can be a big problem for some credit union customers. If you’re looking at one of the larger credit unions, there’s a good chance that it’s part of the CO-OP network that allows thousands ofdifferent credit unions to share ATMs and even physical branches and kiosks. Still, these aren’t always easy to find and you’ll have to plan ahead if you’re going to need access to your credit union while you’re visiting an unfamiliar location.
If you’re considering a credit union that’s on the smaller side, it might have a limited number of locations in your community. Finding time to visit the branch can be difficult, especially since some credit unions don’t have the most flexible hours.
5. There Might Be Fewer Services
Credit unions don’t work with the same budgets as big banks. As a result, they might not have as many products for businesses and consumers. A credit union may have an account with few fees,but if you want to take your saving up a notch, you likely won’t be able to rely on a credit union savings vehicle to offer you the bestrates of return.
The Bottom Line
Credit unions tout that they have many advantages over brick-and-mortar banks. While this is usually true, it’s important for anyone who wants to make a credit union their primary bank to think about the consequences of trading in their regular bank accounts.
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FAQs
May offer fewer products and services.
What is the downside of banking with a credit union? ›
Cons of credit unions
Limited access: Credit unions usually serve a specific community or region, resulting in fewer branches and ATM access. Fewer product options: While credit unions offer many of the same products as banks, you may not have as many options for each as you would with a bank.
What is a weakness of a credit union? ›
Weaknesses of Credit Unions
Membership is restricted. The membership of a credit union is restricted to a specific community, most often a religion, profession, or geographic location.
Why avoid credit unions? ›
Credit unions may be local or regional, with limited branches outside of your area. If you travel or move, this can make getting in-person help difficult. May have fewer services. While many larger credit unions offer all of the same services banks do, some provide a limited range of products and services.
Why do people use credit unions instead of banks? ›
Credit unions operate to promote the well-being of their members. Profits made by credit unions are returned back to members in the form of reduced fees, higher savings rates and lower loan rates.
Are credit unions safe during a banking crisis? ›
Credit unions and banks are both insured, with most banks being insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per customer. Most credit unions are similarly insured by the National Credit Union Administration (NCUA) for up to $250,000.
Is your money safer in a credit union or a bank? ›
One question that often arises is, "Are Credit Unions Safer than Banks?" If you're looking for a short answer, you'll be happy to know that we're not making you read the whole post: Credit Unions and banks are roughly identical in safety because deposits at both are insured by the Federal government to $250,000.
What is the biggest risk to credit unions? ›
Liquidity Risk: The risk of not having sufficient liquid assets to meet the credit union's short-term obligations, which could impact its ability to function effectively and serve its members. Interest Rate Risk: Credit unions often have a significant portion of their assets and liabilities tied to interest rates.
Can a credit union fail like a bank? ›
Like banks, credit unions can fail, but their failure is far less common and the financial fallout is mild by comparison. In 2023, for example, five bank failures represented a total of $549 billion in assets, and the First Republic Bank closure in 2024 impacted $6 billion alone.
Can the government take your money from a credit union? ›
Through “right of offset,” the government allows banks and credit unions to access the savings of their account holders under certain circ*mstances. This is allowed when the consumer misses a debt payment owed to that same financial institution.
Best Credit Unions of September 2024
- Members 1st Federal Credit Union: Best for Overdraft Protection.
- Connexus Credit Union: Best for Checking Accounts.
- Bethpage Federal Credit Union: Best for Savings Accounts.
- Lake Michigan Credit Union: Best for Interest Rates.
- Alliant Credit Union: Best for Digital Banking.
Overview of the Best Banks
- Capital One: Best checking account from a national brand.
- Chase: Best for a large branch network.
- Axos: Best for a variety of online account options.
- Discover®: Best for doing all of your banking in one place.
- Synchrony Bank: Best high-yield savings account from a national brand.
If you prioritize high interest rates, low fees, community involvement, and having a direct say in your institution's direction, then a credit union is likely the right choice for you. If these benefits align with your banking needs and personal values, consider exploring local credit union options.
How do credit unions make money? ›
Any income the credit union generates through interest, fees and loans is then used to fund community projects, reinvest into the organization or provide services that directly benefit members, like paying higher savings interest rates.
What are 3 advantages of using a bank credit union? ›
- Credit Union Benefits.
- Better Rates on Savings Products.
- Lower Rates on Borrowing Products.
- Lower Fees.
- Member-Owned Financial Services.
- Up to $250,000 Insured.
- Perks and Free Education.
- FAQs.
Limited accessibility. Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network such as Allpoint or MoneyPass.
Is it better to open an account at a bank or credit union? ›
Alongside better interest rates, credit unions generally impose lower fees compared to traditional banks. Fees for account maintenance, ATM usage, and overdrafts are often less punitive.
Should I move from a bank to a credit union? ›
Credit unions are known for offering better interest rates on savings, loans, credit cards, and dividends. Additionally, they often have lower fees compared to traditional banks, helping you save money in the long run. Access to shared branches and ATMs.
