Why Credit Unions Are ‘More Affordable’ Than Traditional Banks Right Now
Though inflation is cooling off ever so slightly it still remains at a near 40-year high, and we will likely see higher-than-usual prices stretch into the new year. During these tough times, credit unions could be better options for consumers than big banks.
“Credit unions are not-for-profit cooperative financial institutions, meaning they’re focused on helping their members rather than earning profits to line their shareholders’ pockets like banks,” said Curt Long, NAFCU chief economist and VP of research.
High Savings Rates
“While rates have been raising off their all-time lows over the last three years, some credit unions may offer high savings rates (often in the form of CDs or certificate of deposit) to reward their loyal members,” said Jim E. Carlson, financial planner at Carlson Planning Company.
Low Lending Rates
“[Credit unions may] offer lower lending rates in the form of competitive small consumer loans, car loans and mortgages,” Carlson said. “This doesn’t always or often manifest itself, but that’s how it works, in theory.”
“Let’s take housing as an example,” said Matthew DiGangi, head of annuity and hybrid life/LTC insurance distribution with MassMutual. “With interest rates increasing, it has made buying a home more expensive, resulting in either spending more per month or reducing an overall budget for housing at a time home prices have remained steady. Increased interest rates have also priced some first-time home buyers out of the market. Since earnings from credit unions are reinvested for their members, they typically offer lower mortgage rates, which can help people better afford a home in today’s market.”
Better Customer Service
Though this doesn’t pertain to savings, it’s still a nice perk: Those who do business with credit unions may enjoy better customer service than they would with a big bank.
“Because credit unions have less pressure to maximize revenue and profitability, they often offer better customer service in case of an issue and more banking features than many banks, especially smaller community banks,” said David Shipper, strategic advisor at Aite Group’s retail banking and payments division. “When an issue arises with an account or a member needs to dispute a fee, the credit union banker may be more responsive and fix the problem or reverse a fee because they may not have quotas or goals to meet, and they are there to serve the member. Alternatively, a bank may put several rules in place that make it more difficult for a single banker to change or reverse fees because doing so will impact profitability.”
Sacrificing Some Convenience
Though credit unions are attractive, they do come at a slight cost.
“The difference between credit unions and banks, for the average customer, is a trade-off between cost and convenience,” said Chris Motola, financial analyst for MerchantMaverick.com. “Credit unions tend to offer more favorable terms to customers in terms of rates and fees. This typically comes with the trade-off of less convenient ATM and branch access, as well as reduced product offering.”
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