The Downside of Credit Unions

credit unionCredit union membership is at an all-time high, and much of its growth is likely a product of our rising disillusionment with traditional banks. Banks, after all, are run by executives aiming to enrich stockholders (and themselves), while credit unions are owned by, and run for the benefit of, their members/depositors.

Indeed, according to the Credit Union National Association, 1.3 million people joined credit unions last year, and reaped the benefits. Credit unions tend to offer more affordable services, and lower interest rates, than banks. This infographic from IBM Southeast Employees' Federal Credit Union compares the difference in average national rates (albeit not the latest available) and credit union rates. For example:
  • 36-month used-car loan: 3.7% for credit unions, 5.47% for banks
  • 30-year fixed-rate mortgage: 4.29% for credit unions, 4.2% for banks
  • 3/1-year adjustable rate mortgage: 3.36% for credit unions, 3.54% for banks
  • Classic credit card: 11.64% for credit unions, 13.22% for banks
See the whole infographic at the bottom of the article.

Moreover, these not-for-profit institutions earn high marks in customer service. According to Temkin Ratings, in 2012 credit unions topped all major (and many minor) banks in overall customer experience.

However, before you move your banking business to a credit union, be aware that there are drawbacks that, although they may seem minor, may make you think twice about migrating.

You may not be eligible to join one. In the past, credit unions mainly served people with a certain affiliation, such as to a particular employer or association. Today, though, restrictions are not as tight, and there are many community-based credit unions, too. There are more than 7,000 credit unions, in fact, in America. But you'll still have to shop around to see if you can clear the eligibility hurdle before passing "Go."

They don't always offer as many features as big banks. Credit unions may not employ the latest technology, such as apps that allow you to pay bills on your smartphone. Also, you may not enjoy as broad an ATM network -- though many credit unions have begun to share access with other institutions to offer members better access to banking services.

Their credit cards typically offer lower rewards. With a little digging at a site like, you may be able to find a credit-union credit card that offers decent rewards. Still, most big banks tend to be more generous with points and other reward card perks. The key is to watch out for fees. You may be able to make up the difference in the rewards by paying lower fees for your credit-union banking. However, even credit unions have been hiking some fees, though, so it can pay to shop around. And don't be surprised by future fee increases.

Despite those drawbacks, a credit union can make a lot of sense for many consumers. For more help finding out if a credit union would be a good fit for you, see:

Motley Fool contributor Selena Maranjian holds no position in any company mentioned.

How Do Credit Unions Stack Up To Big Banks [infographic by IBM Southeast Employees' Federal Credit Union]
by IBM Southeast Employees' Federal Credit Union

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I agaree with A.G. Seskis. I been a member of a credit union for years, never had any business with a bank until I got married. Opened a joint acount with my husband at a national bank and the fees began. After showing my husband how the bank was taking our money, we opened a joint account with a credit union and haven't look bank. We have bought cars, house, vacation, retirement accounts, and personal loans with our credit union and very pleased with the service and financial transactions.

January 10 2013 at 7:22 AM Report abuse rate up rate down Reply

This article is a bunch of bullshit !!!
The ONLY downside is the interest rate you get on a CD or otherwise,....but since the Great Depression of `08, the WHOLE INTEREST RATE HAS SANK !!!
All you need is a $25 deposit in any account,...and NO CHARGE for checking,...NO CHARGE for savings / NO CHARGE to keep your money at the Credit Union,...NO charge for anything / FREE DEBIT / CREDIT , everything !!!!
AND , get the SAME INSURANCE OF YOUR MONEY UP TO $250,000 as a Bank does,....just DOESNT cost you your interest profit from having your money deposited as the BANKS ROB FROM YOU EVERY YEAR !!!
Never been happier to KEEP MOST of my money ,..rather than feed it for stupid FEES to the Banks for bullshit of keeping MY OWN MONEY in my own account !!!
If your still stupid enough to keep giving BANKS FEES to keep your own money, then dont bitch,...if you want to keep MORE of your own money,...then go Credit Union,...enough said,...
Have a nice day.

November 29 2012 at 5:41 AM Report abuse rate up rate down Reply

I switched from a bank to a Credit Union in 1996 when a job transfer meant I was going to have to change financial institutions anyway. I wouldn't go back to a bank for any reason. There is no downside to a Credit Union. Oh, and if a bank credit card reward points are that important to you, you are and idiot.

November 28 2012 at 11:36 PM Report abuse +1 rate up rate down Reply

I was in Europe when I was taking out cash from a ATM machine using my CU debit card. My friend and I walked away and after 20 feet away I realized I forgot to get the cash from the ATM machine, we rushed back only to find out no cash. So I called my CU thru my cellphone without even thinking abou the time difference, but to my suprise a real person answered, I told her what happened, as I was talking she was checking into the computer and lo and behold, she told me I did not lose any money, the ATM machine was not working. Unbelievable, I was on the other side of the world and in less than 3 minutes, my problem was solved. If this was a huge bank, like Chase, B of A, Wells Fargo, all my cellphone minutes would have been used up with their circuituous automated responses with nothing done or resolved.

November 28 2012 at 10:02 PM Report abuse rate up rate down Reply

Selena, your bias is showing as is your lack of current infomation regarding credit unions. Frankly, you are at least a decade out of date with the facts.Try one of my blogs on CU's for current infomation:

November 28 2012 at 7:38 PM Report abuse +1 rate up rate down Reply
1 reply to jimspray's comment

Lazy reporting

November 28 2012 at 9:28 PM Report abuse rate up rate down Reply

Selena of the Motley Fool, Who are you kidding???
Try this article on your children first or your friends children.
If your tired of all the misc. fees the Big banks charge and more to come.
Run to your local credit union, they will help you.
Credit Unions Rock and by the way will save you lots of money

November 28 2012 at 7:12 PM Report abuse +1 rate up rate down Reply

Way to look for the half empty glass Selena.

November 28 2012 at 6:52 PM Report abuse rate up rate down Reply
Trajan Saldana

Selena Maranjian seems to be sipping some "too big too fail" koolaid

November 28 2012 at 6:49 PM Report abuse rate up rate down Reply

Did the banks pay you to write this article? Credit Unions rock! They treat their members with respect. CU's are expanding their offerings, creating CUSO's in order to offer more services, moving quickly into the tech services people want, and offering cooperative services in other way. They are moving into the business service areas also. Most people can get everything they need from a Credit Union.

November 28 2012 at 6:08 PM Report abuse +1 rate up rate down Reply
steve thompson

bank failures so far this year 49. Credit unions 11....The fdic can't bail out banks forever...Actually the entire discussion is moot. The entire system is gonna crash, and I'm not gonna be in it...

November 28 2012 at 1:54 PM Report abuse +2 rate up rate down Reply
1 reply to steve thompson's comment

The FDIC doesn't bail out banks. It charges banks an insurance premium in order to (presumably) be able to bail out depositors.

November 28 2012 at 2:13 PM Report abuse rate up rate down Reply