Action Line: Credit unions can be a shrewd savings choice
BY PHIL MULKINS World Action Line Editor
Tuesday, September 04, 2012
9/04/12 at 4:56 AM
Dear Action Line: Why do some people leave banks to join credit unions? - M.T., Tulsa.
Rising fees and scandals have fueled consumer misgivings about banks, driving them to an alternative: credit unions. The Credit Union National Association says its institutions gained 1.3 million members last year, reaching a record high.
Credit unions, which are not-for-profit entities, number more than 7,000 nationwide. They are cooperatively owned by their members.
"Their mission is to provide members with affordable financial services," said Pat Keefe, an association spokeswoman.
Credit unions have superior service, leading to satisfied members. In the most recent Prime Performance Bank and Credit Union Customer Satisfaction Survey tulsaworld.com/PrimePerfBnkVCU, credit unions beat banks in all categories, with customer rating satisfaction at 89 percent, 7 points greater than the industry average.
However, eligibility limits membership in credit unions. Unlike banks, consumers cannot open accounts at just any credit union. Keefe says they must meet certain fields of membership such as employee groups, associations, religious or fraternal affiliations and residential areas.
"Credit union fields of membership have been expanded," said Greg McBride, CFA, senior financial analyst at Bankrate.com. "Increasingly, it's no longer a requirement to be an employee of one specific company, and 'community credit unions' are eligible to anyone who lives, works or worships there."
Better credit card rates: Credit unions offer lower interest rates. McBride says they traditionally pass on savings from not-for-profit status through their product line, offering higher rates on savings accounts and lower rates on loans and credit cards.
"When you carry balances on credit cards and want to transfer to a lower-rate card, credit unions offer very competitive rates," McBride said.
However, banks offer better rewards programs.
Minimum balances: Accounts at credit unions have fewer strings attached. Although many bank account holders are forced to adjust to higher minimum balance requirements, 72 percent of credit unions in the 2012 Bankrate Credit Union Checking Survey had no minimum balance requirements to avoid fees.
Richard Hunt, president and CEO of Consumer Bankers Association tulsaworld.com/ConBnkAssn , points out that larger banks have greater resources at their disposal than credit unions. He says these resources give big banks the ability to make investments in emerging technologies such as mobile banking apps.
While credit unions lack some newer services and features, McBride says their lack should not scare away consumers.
"They may not be on the cutting edge, but they can still meet the financial needs of most people," he said.
Original Print Headline: Credit unions can be a shrewd choice
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