A Cheeky Take on Credit Unions
Alright, let’s settle in and talk about something somewhat groan-inducing: credit unions. Yeah, I know what you’re thinking – isn’t that the friendly neighborhood alternative to those cold, blue-blooded banks? Well, hold your horses. There’s no need to swing from the chandeliers just yet, my friend. As Jeffry Pilcher from The Financial Brand wisely states, “Credit unions aren’t all sunshine and roses.”
Stock up on your favorite comfort food, because we are about to take a deep dive into the rough and tumble world of credit unions – the good, the bad, and everything else tucked in between.
Facing the Giants: Challenges of Credit Unions
Sure, credit unions may smack of the common man’s battle against corporate monoliths. Rebellion against the tyranny of big banks? Sign me up! But here’s the kicker. Despite their skyrocketing popularity, these underdog institutions aren’t exactly exempt from the same issues bogging down traditional banks, such as derailing trains of revenue due to plummeting interest rates, escalating loan default rates, and an overall economic landscape that resembles a minefield.
Let’s throw some cold water on the fire of enthusiasm here. Did you know that only 72% of credit unions are currently offering free checking accounts? Bit of a downer, huh? And who could forget the classic ‘bait and switch’ we all love – the increase in fees. Remember, these warm and fuzzy institutions aren’t immune to failure. In the aftermath of 2008, roughly 105 out of around 7,000 credit unions have either failed or been swallowed whole by larger, sturdier entities.
All doom and gloom aside, credit unions aren’t exactly useless, either. They generally perform better than banks on several consumer-focused metrics, like free checking (a paltry 39% in the case of banks), and frequently offer some sweet deals on loans and credit cards.
Before Taking the Plunge: Understanding Credit Union Myths
Before you hand over the keys to your savings, let’s clear the air surrounding a few myths, shall we?
Myth: Credit Unions Have Absolutely No Fees
Reality: Sometimes Banks Might Just Be the Better Deal
Just because your friendly nearby credit union flaunts free checking doesn’t imply they won’t spring a trap in the form of hidden fees. Ron Shevlin from Aite Group drops a truth bomb, warning about ‘hidden’ fees that could ambush you on both sides of the fence. Often, banks and credit unions quietly impose fees for trivial things like account inactivity or overdrafts. So, the smart move? Review your banking habits thoroughly and compare services you really use.
You know how they say two can play at the same game? Guess what, large banks, sly as a fox, often dodge the bullet of free checking by enticing customers with the prospect of avoiding monthly fees through direct deposit or by opening a credit card account.
Folks who swear by ATM machines could end up paying an unexpected premium at a credit union. While some credit unions have banded together to extend ATM access, not all are singing the same tune. And even this coverage pales in comparison to the global fangs of major banks. Bottom line? You could rack up some heart-breaking foreign ATM fees. Still love the ATM? Maybe stepping into the arena of online banks, like Schwab, could be your golden ticket.
Myth: Credit Unions Are the Gold Standard in Customer Service
Reality: Service quality hangs heavily on your needs
For routine tasks, credit unions rise to the occasion with a dash of flair. But on the flip side, large banks have started flexing their muscles, all in order to court those luxurious, high-net-worth clients.
The fight for high-value customers could give WWE a run for its money. Bank of America, for instance, lures in customers with the tantalizing option of picking their cash-back retailers. Now isn’t that something?
As for credit cards, the pendulum swings both ways. If you’re the kind of person who likes to carry a balance (be honest now), a credit-union-issued card might get you those lucrative lower interest rates. But the ones who clear their balances before the month ends might find themselves in a sea of cashback or travel rewards by banking on, well, a bank card. In fact, going by Bankrate.com’s 2012 Credit Card Rewards Survey, a meager five out of 50 reward cards featured came from credit unions.
If you’re a sucker for personal service, you’ll find credit unions living up to their reputation. But if tech is your thing (say mobile banking), you might want to look elsewhere. Beware, innovative tech-lovers, credit unions aren’t always quick to ride the digital wave. In fact, only 25% of credit unions even offer mobile banking. Those that do, don’t always sport the latest features. Need cutting-edge digital solutions? You might find a credit union’s traditional approach as outdated as flip phones.
The Winds of Change: Less Customer-Friendly Credit Unions?
They might have built castles in the air with superior customer service, but some perks of credit unions are fading faster than a summer tan.
From 2007 to 2012, the number of credit union members jumped from 86.8 million to 93.8 million. Not too shabby, right? But here’s the twist – the average insufficient funds fee rose from $24.88 in 2010 to $26.65 in 2012. And to add a bit more bite, from 2010 to 2012, the number of credit unions charging a monthly service fee clambered from 18% to 28%.
In the end, folks, if you’re toying with the idea of joining the credit union wagon or just looking for something contemporary, keep your eyes wide open and consider everything. Remember, as they say, the devil is in the detail.