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
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.
What is the downside of banking with a credit union? ›
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.
Which of the following is a downside for credit unions? ›
Choosing to use a Credit Union
The downside of credit unions include: the eligibility requirements for membership and the payment of a member fee, fewer products and services and limited branches and ATM's.
What is a disadvantage of a credit union over a traditional bank? ›
A credit union tends to have fewer branches on average than banks. For example, the nation's largest bank—Chase—has more than 4,700 branches. 15. To offset this disadvantage, credit unions have formed a CO-OP Shared Branch network with more than 30,000 ATMs and 5,000 shared branches nationwide.
Which is safer, FDIC or NCUA? ›
One of the only differences between NCUA and FDIC coverage is that the FDIC will also insure cashier's checks and money orders. Otherwise, banks and credit unions are equally protected, and your deposit accounts are safe with either option.
Why do banks not like credit unions? ›
First, bankers believe it is unfair that credit unions are exempt from federal taxation while the taxes that banks pay represent a significant fraction of their earnings—33 percent last year. Second, bankers believe that credit unions have been allowed to expand far beyond their original purpose.
Can a credit union crash like a bank? ›
Experts told us that credit unions do fail, like banks (which are also generally safe), but rarely. And deposits up to $250,000 at federally insured credit unions are guaranteed, just as they are at banks.
What are the top credit union issues? ›
Here are the top 10 challenges credit unions are navigating in order to keep up, and stay both relevant and competitive.
- Digital & AI Transformation. ...
- Regulatory Compliance. ...
- Cybersecurity Threats. ...
- Competing with Larger Banks and Fintechs. ...
- Membership Growth & Awareness. ...
- Aging Membership. ...
- Talent Acquisition and Retention.
Cyberattacks are one of the greatest threats financial institutions face. The average financial security breach costs approximately $5.97 million. For credit union cybersecurity, this means keeping up to date with the latest cyber solutions is critical to protecting member data and their good name.
What are three pros and three cons for credit unions? ›
The Pros And Cons Of Credit Unions
- Better interest rates on loans. Credit unions typically offer higher saving rates and lower loan rates compared to traditional banks. ...
- High-level customer service. ...
- Lower fees. ...
- A variety of services. ...
- Cross-collateralization. ...
- Fewer branches, ATMs and services. ...
- The biggest negative.
Lower fees: Because credit unions are not-for-profit, they typically charge lower fees than banks. Higher savings rates: On average, you'll find better interest rates at credit unions than banks, though some high-yield accounts at banks rank at the top of the industry.
Which is safer a regular bank or a credit union? ›
However, because credit unions serve mostly individuals and small businesses (rather than large investors) and are known to take fewer risks, credit unions are generally viewed as safer than banks in the event of a collapse. Regardless, both types of financial institutions are equally protected.
What is the best credit union to bank with? ›
Alliant Credit Union.
Alliant offers an above-average interest rate for savings. Membership is not restricted; you can join with a $5 donation to a nonprofit. Alliant's mobile app is highly rated, and members have fee-free access to an 80,000-ATM network.
Are credit unions at risk of collapse? ›
The recent banking crisis may leave you wondering if credit unions are a safe place to park your cash. The truth is credit unions can still fail. But, even if yours does, you'll probably come out of the situation financially stable.
How safe is my money in a credit union? ›
Which is Safer, a Bank or a Credit Union? As long as you are banking at a federally insured institution, whether it is a credit union insured by the NCUA or a bank by the FDIC, your money is equally safe. Credit unions are owned by the members—your savings account at a credit union is a share of ownership.
What happens if a credit union fails? ›
If a credit union is placed into liquidation, the NCUA's Asset Management and Assistance Center (AMAC) will oversee the liquidation and set up an asset management estate (AME) to manage assets, settle members' insurance claims, and attempt to recover value from the closed credit union's assets.
Is it better to bank with a credit union or bank? ›
Lower fees: Because credit unions are not-for-profit, they typically charge lower fees than banks. Higher savings rates: On average, you'll find better interest rates at credit unions than banks, though some high-yield accounts at banks rank at the top of the industry.
Is your money safer in a credit union or a bank? ›
However, because credit unions serve mostly individuals and small businesses (rather than large investors) and are known to take fewer risks, credit unions are generally viewed as safer than banks in the event of a collapse. Regardless, both types of financial institutions are equally protected.
Is it safer to have your money in a credit union versus a bank? ›
Just like banks, credit unions are federally insured; however, credit unions are not insured by the Federal Deposit Insurance Corporation (FDIC). Instead, the National Credit Union Administration (NCUA) is the federal insurer of credit unions, making them just as safe as traditional banks.
