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Not Your Grandmother’s Credit Union

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I opened a new credit union account recently. I wasn’t protesting bank fees (my bank still offers free debit cards with rewards), but a local credit union offered me a 1.99% rate on a car loan, and I couldn’t pass that up.

While opening the account, I thought back to how different that experience was from the very first credit union account I opened. When I was 19 or so, I joined a local teachers’ credit union (my father was a teacher, and family members were eligible to join). I don’t recall ever visiting a branch, but do remember calling the treasurer and picking up a check at her house when I wanted to withdraw funds.

I am well aware that credit unions have changed dramatically over the years. But I was surprised to learn that the one I joined recently offers services that aren’t even available to me yet through my bank. I can deposit money at a local 7-11, for example, and once my account is established I am eligible for remote deposit capture, which means I can scan a check and deposit it remotely rather than visiting the branch.

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The stereotype that credit unions are often smaller, less sophisticated, or offer fewer services than most banks simply did not apply here. It made me wonder how typical these services are among credit unions nationwide. I contacted the Credit Union National Association, which was more than happy to share statistics with me.

“While credit unions tend to be smaller than banks on average, they generally provide the same loan and deposit services, easy access, and today all consumers can join,” said Mike Schenk, CUNA vice president of economics and statistics, in an email to me.

He described some of the features of today’s credit unions:

Free ATM Access: Your credit union is likely to belong to a surcharge-free ATM network. (71% do.) The CO-OP Network, for example, has a nationwide network of 28,000 ATMs that allow the members of these credit unions to access their funds without incurring a surcharge. Locations include credit unions, and retail locations, including 5,500 7-Eleven stores, as well as Costco, Walgreens and other outlets. You can look up network locations online here—or get phone, text message and GPS locator options.

Shared Branches: Want to visit a branch of a credit union but can’t find one close to work or home? Your credit union may participate in a “shared branch” network, which means you can use another credit union’s branch just as if it were your own. Schenk points out that this is unique among credit unions: “You would be hard pressed to find banks sharing one another’s branch facilities.”

While the credit union I joined used to participate in a shared branch network, it no longer does. (Perhaps it had to do with all the “snowbirds” that land here in Florida each winter. They may have required too much in the way of staff resources. I didn’t find out.)

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Electronic Services: Some 97% of credit unions offer web-based home banking, allowing members to check balances, view their account histories or transfer funds online. And 94% offer online bill payment. Slightly less than half (47%) offer mobile banking, though. And just 16% offer account aggregation (services that show all your bills in one place like Mint.com).

The key difference between credit unions and banks has always been the fact that credit unions are member-owned, non-profit organizations that answer to members, not shareholders. They aren’t all perfect: I closed a local credit union account recently because their fee schedule seemed way too similar to that of a big bank. But for most credit union members, the main benefit of working with a credit union is financial: credit unions often save members money.

When it comes to credit cards, for example, a July 2010 report by the PEW Health Group found that the median credit card rate (lowest advertised purchase rate) for the twelve largest credit unions was 9.90%, as opposed to 12.99% for the twelve largest banks. Median late fees, overlimit fees and penalty rates were also lower.

Overall, CUNA estimates that “the combination of lower loan rates at credit unions, higher savings yields, and fewer and lower fees at credit unions translated into $6.3 billion in direct financial benefits to the nation’s 92 million credit union members.” That works out to be an average of “$70 per member or $130 per member household,” says Schenk. He points out that some members, like me, who take out low-rate auto loans may save even more, with the average car buyer saving $900 over the life of the loan.

Nov. 5, 2011 has been dubbed Bank Transfer Day by Kristen Christian, who started an online movement in reaction to Bank of America’s announcement to impose a $5 monthly fee on debit card purchases (a decision BofA recently reversed). If you’ve been thinking of joining in and switching to a credit union, but are worried you won’t get all the bells and whistles you’ve enjoyed at your bank, you may be in for a pleasant surprise. Today’s credit union looks a lot like a bank—except it may be better. Visit aSmarterChoice.org to find a credit union you can join.

[Related article: Want to Switch Banks? Here’s How to Do it.]

Kristen Christian, who started the Bank Transfer Day movement, will be a guest on The Credit Line radio show hosted by Credit.com chairman and co-founder, Adam Levin, this Saturday Nov. 5 at Noon ET/9 a.m. PT, streaming live on Los Angeles’ KFWB 980 AM.

Image: meknits, via Flickr.com

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  • http://www.aSmarterChoice.org J Stevenson

    HI, Gerri – great column! I have one correction. The correct website address to search for a credit union is http://wwww.aSmarterChoice.org

    • Gerri Detweiler

      Thank you and my apologies for the link – it’s been fixed.

  • http://www.depositaccounts.com Ken

    About shared branching, it does seem that fewer credit unions are participating. This seems like a huge benefit for those who like the convenience of a local branch. Perhaps like you said, this may require too many resources. It would be interesting to know the percentage of credit unions that participate. My guess is that it’s under 50%.

  • Brian L. Garrett

    We are currently witnessing the largest increase in credit union membership in history. More people joined credit unions last month than the entire previous year. And we haven’t seen the full shift yet. That’s the good news.

    If there will be a down side to this, it’ll come from the credit unions and industry itself. Hopefully they won’t take advantage of this enormous increase in business and begin thinking like the big banks most of their new customers have just left. Greed is a powerful animal. And this is the worst possible time for “shared branching” to be declining.

    Now more than ever, this industry needs people with vision at the helm. Business as usual ended yesterday.

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  • missfi

    My credit union is very much like a bank without all the convenience of most banks….time for a change.

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