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
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. May offer fewer products and services.
What is the downside of banking with a credit union? ›
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. May offer fewer products and services.
Are credit unions safe during a banking crisis? ›
Credit unions are insured by the National Credit Union Administration (NCUA). Just like the FDIC insures up to $250,000 for individuals' accounts of a bank, the NCUA insures up to $250,000 for individuals' accounts of a credit union. Beyond that amount, the bank or credit union takes an uninsured risk.
Which is safer, FDIC or NCUA? ›
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.
Is your money safer in a credit union or a bank? ›
Generally, credit unions are viewed as safer than banks, although deposits at both types of financial institutions are usually insured at the same dollar amounts. The FDIC insures deposits at most banks, and the NCUA insures deposits at most credit unions.
Why do people not like credit unions? ›
Some have argued that credit unions are inherently inefficient because of their one-member, one-vote governance structure.
Why do people use banks and not credit unions? ›
Credit unions tend to offer lower rates and fees as well as more personalized customer service. However, banks may offer more variety in loans and other financial products and may have larger networks that can make banking more convenient.
Can credit unions seize your money if the economy fails? ›
The FDIC and National Credit Union Administration (NCUA) oversee banks and credit unions, respectively. These federal agencies also provide deposit insurance. When a financial institution is federally insured, money deposited into a bank account will be secure even if the financial institution shuts down.
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.
What is a threat to credit unions? ›
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.
For example, a two person joint account with no beneficiaries has $500,000 in coverage. This coverage is separate from and in addition to the coverage available for other accounts such as individual accounts with no beneficiaries and retirement accounts.
How long does NCUA have to pay you back? ›
The NCUA's Asset Management and Assistance Center liquidates the credit union and returns funds from accounts to its members. The funds are typically returned within five days of closure. Sometimes, the NCUA may use the liquidated funds to pay off any outstanding loans of the account holder.
Can the government take your money from a credit union? ›
Through right of offset, the government allows banks and credit unions to access the savings of their account holders under certain circ*mstances. This is allowed when the consumer misses a debt payment owed to that same financial institution.
What is the downside of a credit union? ›
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.
Should I worry about my money in a credit union? ›
Money held in credit union accounts is insured through the National Credit Union Administration (NCUA). Many types of accounts are covered by insurance such as checking, savings, certificates of deposit, money market accounts, and others.
Is my money safe in a credit union during a recession? ›
Some people wonder where the best place to store their money is to protect its value amid economic uncertainty. One way to ensure your money stays safe is to deposit it in a credit union. Credit unions protect members' finances, whatever the market conditions are, including during a recession.
What is the best credit union to bank with? ›
Here are some of the country's top credit unions:
- Alliant Credit Union. Alliant offers an above-average interest rate for savings. ...
- Consumers Credit Union. ...
- Navy Federal Credit Union. ...
- Connexus Credit Union. ...
- First Tech Federal Credit Union.
The Bankrate promise
Here's an explanation for how we make money . National Credit Union Administration (NCUA) credit unions had seven conservatorships/liquidations in 2022 and two so far in 2023. While credit unions have experienced several failures in 2022, there were no Federal Deposit Insurance Corp.
What is an advantage and disadvantage of a credit union? ›
So, get comfy. This is going to be a comprehensive look at credit unions': Upsides, such as better rates, more favorable terms, superior service, and fewer fees. Downsides, like more limited accessibility, finite eligibility, and narrower product and service portfolio.
