MADISON, Wis. (7/18/14)--Daman Davila, a staff writer reporting for
, a community of bloggers that helps consumers "live large on a small budget," offered "9 Good Reasons to Choose a Credit Union Instead of a Bank" in a recent post.
Davila shared his personal experience. "I am huge believer in credit unions," he wrote. "When I first arrived to the U.S., I only had my savings and my dreams of completing an MBA degree. As an immigrant I didn't have a credit history or a U.S. bank account. This meant that many big names in banking were hesitant to give me a chance. This made qualifying for a credit card or becoming eligible for a car loan very challenging. Thanks to a local credit union, I was not only able to achieve these milestones, but also build my credit history and become financially independent."
Here are the reasons Davila cited to choose a credit union instead of a bank:
- Credit unions have owners. As owners of their financial institutions, credit union members have a say in how the organization is run. Credit unions--and all cooperatives--are governed by a one-member, one-vote rule. Also, when a credit union makes a profit, it is used to provide better opportunities to the community that it serves.
- Accounts have fewer and lower fees. "Unlike big banks, credit unions aim to minimize account fees," Davila wrote. "For example, credit unions are well known for not charging monthly maintenance fees, which are about $12 to $14 at big-name banks."
- Clerks talk with you. Credit unions are known for providing personal service, Davila wrote. "For example, in my first year I miscalculated an incoming paycheck and wrote a check that was $10 over my balance," he explained. "Instead of charging me an overdraft fee, a rep from my credit union gave me a call. He asked me if I could make a deposit to cover the $10 difference. Also, my credit union gave me a one-time overdraft fee waiver because they understood that it was a rookie mistake."
- Lower financing costs and higher payouts. Data from the National Credit Union Administration consistently shows that credit unions outperform banks. For example, in March, credit unions had a national average rate of 4.75% for home equity loans, while banks had a 5.33% average rate. A $2,500 money market investment would have paid an average 0.16% at credit unions and an average 0.12% at banks. A $10,000 5-year certificate of deposit yielded a national average of 1.32% at credit unions, 1.14% at banks.
- Access to financing for low-income individuals. Credit unions do not only offer cheaper financing options, but also provide low-income or financially distressed individuals a chance to qualify for financing.
- Friendly credit card terms. Credit unions are well-known for providing some of the most attractive credit cards, no annual fees, no introductory rates and low annual percentage rates. "My very first credit card was through my credit union and I still keep it until this day," Davila wrote. "I have not been able to find a credit card that matches the great terms that my credit union offers."
- Car loans. As of March 2014, a 48-month new-car loan stood at a national average of 2.69% at credit unions, and of 4.94% at banks. For 48-month used-car loans, the average rate was 2.87% for credit unions, 5.48% for banks.
- Private lines of credit for college students. Some credit unions partner with private student-loan providers to offer lines of credit to supplement college education costs.
- Christmas and club savings accounts. Savings club accounts help members set aside money on a monthly basis, and then withdraw it at a certain time for big expenses. Some banks offer savings clubs, but consumers are more likely to find them at credit unions, because the accounts aren't designed to generate profits (