Erik Hansen is a graduate student pursuing a Master of Public Policy and the “When I Was a Mustang…” columnist.
Tired of transferring money from your checking account to your savings account every month just to keep your “free” checking account at one of the large, for-profit banks? How about those overdraft charges you might occasionally incur and the impersonal customer service?
While large banks have advantages such as greater availability of branches and branded ATMs, most of us spend at least five days of the week, nine months out of the year, here in San Luis Obispo. Even with its relatively small size, San Luis Obispo is fortunate to have a host of credit unions to choose from. These include institutions such as SESLOC Federal Credit Union, Cost Hills Federal Credit Union, SLO Credit Union and Golden 1 Credit Union. If you’re reading this column, you’re likely eligible to join at least one.
If you’re currently happy with the service you receive at your bank, great. However, if you’re curious or have ever thought about joining a credit union, the following are some of the benefits to consider when making the switch.
Credit unions are owned by its members, and don’t report to shareholders. That’s right, credit unions are nonprofit. This means instead of paying dividends to outside investors, money is trickled down to its members through the various services offered by the credit unions. This also means members choose the directors of their credit union, and in turn, the direction that their credit union will steer. Such measures make stakeholders out of credit union members, with more interest and power in how the credit union operates.
Credit unions are exclusive. While anyone can walk in off the street and open an account at Wells Fargo, you’ll need to be a member of a “group” to join a credit union. This can mean having a certain employer, or being a student at Cal Poly. This can also simply mean living in a specified community. Similar to group discounts you might receive on your car insurance, this cuts down on the institution’s risk and lowers costs, which again, trickles down to its members.
Checking and savings accounts are more member-friendly. The vast majority of credit unions offer free checking and savings accounts, without having to enroll in direct deposit or some other money moving scheme. Credit unions are also typically more lenient in terms of account overdrafts, only penalizing repeat offenders, and will usually offer some form of overdraft protection, such as connecting your checking account to your savings account or credit card.
According to the DataTrac Corporation, as of April 1, 2011:
– The typical checking account at a California credit union with a balance of $5,000 will accrue 0.12 percent annually, as opposed to 0.09 percent at the average California bank.
– The typical savings account with a balance of $10,000 will accrue 0.18 percent annually, as opposed to 0.10 percent at the average California bank.
– The typical five year, $10,000 CD will accrue 2.09 percent annually, as opposed to 1.75 percent at the average California bank.
Credit unions provide much better loan rates. This is one reason to start building a relationship with your local credit union now. Credit card, home and car loan rates are much better at credit unions. Not to drown you with numbers again, but with good credit, as of April 1, 2011:
– The typical basic credit card from a California credit union has an APR of 5.15 percent, as opposed to an APR of 10.99 percent at the average California bank.
– The typical 30-year, fixed-rate mortgage from a California credit union is 4.75 percent, as opposed to 4.88 percent at the average California bank.
– The typical five-year loan on a used car from a California credit union has an APR of 2.79 percent, as opposed to an APR of 3.99 percent at the average California bank.
Expanded ATM locations. Before you join a credit union, if you are concerned about accessing your cash surcharge free at ATMs, make sure it is a member of the Credit Union ATM CO-OP Network. If the credit union you decide to join is a member, this will give you access to cash at 28,000 ATMs, spread throughout the United States, surcharge free. While there are a plethora of Wells Fargo ATMs in California, good luck finding one in Louisiana or Oklahoma.
Customer service is what credit unions pride themselves in. While measuring customer service can be subjective, and varies by credit union, as community institutions, credit unions pride themselves in the quality of service they provide the community and its members. However, in addition to typically lacking the expanded online services of most major banks, the quantity of services provided by credit unions can be the other sticking point for most people when it comes to making the switch. You should expect to have to walk in to the credit union for questions, or only call during business hours. If calling Bank of America at 2 a.m. is your thing, it would probably be best to stick with them.
Another issue to watch out for before joining a credit union is that they are insured through the National Credit Union Administration (NCAU). The NCAU is somewhat similar to the FDIC, in that it insures credit union member deposits up to $250,000. A few credit unions have remained uninsured, so if you decide to join a credit union, make sure it’s insured by the NCAU.