NEW YORK (4/4/13)--Low costs are cited as a primary reason many consumers switch to credit unions in two articles that originally appeared in Bankrate.com and were picked up Tuesday in FOX Business.
Consumers are turning to credit unions for one reason above all others: lower cost, says Charles F. Beaucamp, assistant professor of finance at Middle Tennessee State University, Murfreesboro, in "Lower Costs Drive Credit Union Growth." He offers a brief history of credit unions, explains how they differ from banks, and looks at the pros and cons of using credit unions for savings.
"The major difference between banks and credit unions is their respective organizational structures," Beaucamp said. "Owned by equity investors, banks are organized as for-profit entities that serve both the individual and business communities," he said, adding credit unions are organized as not-for-profit financial cooperatives owned by their depositor members.
"The recent growth in credit union membership can be traced to a large migration of clients from larger banks over to credit unions," he said. "This has not been so much a backlash against banks, but simply consumers searching for lower-cost alternatives to traditional banks."
The article noted many banks instituted fees, "thus driving up the costs to consumers. On the other hand, credit unions have not experienced these cost increases and have leveraged their not-for-profit operating structures to offer competitive rates."
In "What Can You Gain by Ditching Your Large Bank," Bankrate.com says banks and low interest rates are pushing consumers to look for alternative ways to bank. "Banks have steadily increased fees in the past two years," the article said, citing a Bankrate Checking Survey, which found 72% of America's largest credit unions offer free checking, compared with 39% of banks. Banks dropped to 39% from 45% in 2011 and 76% in 2009, it said.
More than 5.6 million Americans recently closed their bank account, with 214,000 opening new accounts at a credit union, said Andrew Schrage, co-owner of Money Crashers."Two of the best alternatives to banks for keeping your money in a place where it also can gain a return are credit unions and money market mutual funds," he said.
"Many consumers believe that if you join a credit union, you have to give up access and convenience, but that is no longer the case," said Boeing Employees' CU (BECU) spokesman Todd Pietzsch in the article. "At BECU and most credit unions, you will find similar services to a bank. And as credit unions work together in a cooperative ATM network, members have access to over 30,000 surcharge-free ATMs throughout the country," Pietzsch said.
To view the articles, use the links.