In this blog, we'll discuss the benefits of opening a credit union checking account.
Checking accounts help people pay bills and manage their finances. However, some potential customers may think traditional banks provide the easiest way to open an account.
When it comes to the benefits of opening a credit union checking account, most branches offer better options and rates. Oftentimes, they also offer more member benefits.
What is a Credit Union?
Credit Unions differ from traditional banks. Members own the credit unions they belong to, unlike banks that report to outside stakeholders.
Credit union employees build personalized relationships with their members and help them achieve their financial goals. Furthermore, credit unions pride themselves on supporting their local communities.
Why Open a Checking Account with a Credit Union
Credit unions uphold missions to their communities. They stress the importance of financial well being for all their members. And, they offer perks to potential members who decide to join them.
Below you will find some of the advantages of opening a checking account with a credit union.
NOTE: To open a checking account with most credit unions, including 121 Financial Credit Union, members are required to purchase a "membership share" in the credit union. This is generally a small deposit into a savings account. At 121 Financial, opening a share account requires a $10 investment ($5 membership fee and $5 minimum deposit). This is often in addition to the minimum deposit for opening a checking account.
Traditional banks need to continuously make money; charging fees provides banks with a steady stream of income. Many banks assess a monthly service fee of around $25 if you do not keep a minimum amount of money in your account.
Some banks even charge a fee to open an account. In contrast, credit unions offer a variety of checking accounts to potential members. As a general rule, if you opt for an account with perks, you may pay a monthly fee.
If you want a basic account, without any additional benefits like compound interest, credit unions accommodate that, too.
Some benefits include:
- Lower or zero monthly service fees
- Reduced transfer fees
- Smaller overdraft fees
- No ATM fees
- Better Interest Rates – Many branch-based banks offer checking accounts that accrue zero interest, even when customers want that option or a tiny amount that does not add up to much. This leaves customers with no way to make additional interest from their own money. Since 2009, the Federal Deposit Insurance Corporation (FDIC) has tracked interest rates and published them. The current trend shows that banks will continue to let interest rates decline on most checking accounts – they have fallen over the last two decades.
In 2018, according to a BankRate survey, the national average on an interest checking account, also known as high-yield checking, equaled 0.06% annual yield percentage (APY).
However, that figure took into account all financial intuitions including online banks, which have no physical location, as well as local ones.
When you break the figures down and only review brick-and-mortar banks, you gain a different perspective. The largest brick-and-mortar banks had an average interest rate of 0.01%. That figure applied to accounts that had under $25,000 in them.
Additionally, compound interest does not work the same across financial intuitions.
For example, some online banks compound interest daily while other banks do this on a monthly, quarterly or yearly basis.
You get more money when financial institutions add interest to your balance daily. Basically, you obtain faster earnings the more frequently your banking institution compounds the interest.
Furthermore, most credit unions do not charge a fee when you open an account. If they do, they charge a much smaller one.
They also offer additional perks for becoming a member. Some benefits include low dividends and cashback bonuses.
Overall, in 2019, credit union checking accounts still offered better interest rates when compared to other branch-based banks.
When compared to regional banks, credit unions provide 10 times more value and 51 times more value when compared to the top national banks.
Credit unions cater to a specific segment of the population. For example, some credit unions may work with students or people who work and live in a certain area. This allows them to offer checking accounts that come with fewer restrictions.
At banks, the FDIC ensures all deposits up to $250,000. While the FDIC does not oversee credit unions, potential customers should not worry.
Most credit unions offer a similar type of protection from the National Credit Union Administration (NCUA), an independent federal agency that regulates and supervises federal credit unions.
Just make sure the credit union you might join belongs to that overseeing body. When you join a credit union that belongs to the NCUA, any deposit made into a checking account becomes insured for up to the same amount of $250,000. This is just like a regular branched-based bank.
Local, but Nationwide
While credit unions have roots in their local communities, obtaining a checking account with a debit card has one perk that traditional banks cannot match. You gain the ability to use that debit card at virtually any ATM – all without incurring any out-of-network fees.
CO-OP Shared Branching
CO-OP Shared Branches, the second-largest banking network in the United States, has 5,600 credit union branches and self-service express terminals in all 50 states.
This credit union network helps solidify that the local but national approach to banking works.
When a credit union becomes a member, it works in conjunction with other credit unions to increase member benefits. This gives credit union customers the ability to use in-network ATMs and branch services outside of their local credit union's jurisdiction.
Members often use other credit unions' branches within the same local area. However, they have the option to use services and ATMs nationally, as long as they belong to CO-OP Shared Branches.
In addition, this network allows people to visit other credit unions within the network and bank just as they would at their credit union free of charge.
Better Customer Service
Banks remain in the business of turning a profit. In contrast, credit unions remain not-for-profit intuitions, meaning they focus on serving customers by putting them above profits.
Once you open your checking account at a credit union, you become a lifetime member. Because of this, credit union employees work hard to gain the trust of their members. They focus on personalized interactions because they know every member does not represent a dollar sign.
Furthermore, a credit union does not have board members comprised of outside shareholders. Because of this, it has the ability to conduct banking in a way that not only benefits its members but the local community.
Claes Fornell International (CFI) Group, a global firm that measures employee and customer satisfaction metrics, measures yearly credit union satisfaction rates.
In 2018, CSI published its Credit Union Satisfaction Index (CUSI). The group found that total credit union satisfaction measured 86 on a scale of 0 to 100. This was up two points from the previous year.
Highly Personalized Service
Tailored customer service efforts mean members have more pleasurable banking experiences. The Credit Union National Association (CUNA), a financial services trade association that advocates for US-based credit unions, found that credit unions have increased their number of members since the last financial recession that took place in 2008.
CUNA reported that overall credit union membership increased every year since 2012.
In 2018, for the first six months, credit unions increased their members by 4.3%. In June 2019, total credit union members equaled 120.5 million, which signified that memberships grew by 0.3% that month.
Is a Credit Union Checking Account the Right Choice for You?
Some credit unions have requirements to join. For example, you may need to reside in the area or belong to a certain profession.
First, check to see if you meet the intuition's requirements. Then, review the advantages of opening a checking account with your local credit union:
- Increased customer satisfaction levels
- More personalized attention from branch staff members and recommendations from trusted people that live in your community
- A low minimum to open any type of checking account
- Checking accounts created to benefit credit union members - options include no monthly fees on some types of accounts, including accounts for students and people interested in basic checking accounts. Furthermore, lower monthly fees may exist on some checking accounts that compound interest and come with perks.
- Free online banking
- Unlimited debit card usage, including cashback
- Mobile check deposit
- No ATM fees
- Free mobile banking, along with alerts
- Overdraft protection
- Unlimited bill pay
Credit Union Checking Accounts Help People with Fair to Poor Credit
Banks will not always work with people who have fair to poor credit.
In contrast, credit unions welcome people that have fair to poor credit because they support the mission of helping community members improve their financial standing.
Credit unions offer accounts with zero maintenance fees, along with no minimum balance to keep the account open. Credit unions give options to people who need a chance to improve their credit or to people who need time to recover from financial hardship.
Most people that suffer a financial hardship like bankruptcy will not have the ability to open an account at a top national bank. Oftentimes, this is because of the stringent requirements they impose.
If you have fair to poor credit and open a credit union checking account, you gain another perk. You become a member of that credit union for life – even when you graduate from college, move outside the community or change jobs.
Customer Satisfaction and the Importance of the Community-First Approach
A Gallup poll released in 2016, measured customer satisfaction levels between banks and credit unions. The poll found that credit union employees consistently ranked higher in member engagement – often because of the personalized service offered when compared to traditional banks.
That Gallup poll discovered that 52% of credit union members felt fully engaged compared to 17% of top national banks.
In 2018, FIS, a global financial services technology firm, surveyed consumers as part of its Performance Against Customer Expectations (PACE) findings, a poll designed to measure key attributes of financial providers like banks and credit unions.
While the study showed most customers were "extremely satisfied" or "very satisfied" with their financial institutions, credit union satisfaction levels ranked higher, especially when compared to the top 50 global banks.
Below you will see an overview of the findings:
- For credit unions, 60% of members were extremely satisfied and 32% were very satisfied.
- The top 50 global banks had a 22% extremely satisfied rating and a 45% very satisfied rating among their customers.
- For regional banks, 28% of members were extremely satisfied and 49% were very satisfied.
- Direct banks, also known as online or virtual banks, had a rating of 48% extremely satisfied and a 35% very satisfied rating.
- Community banks came in at a 37% extremely satisfied rating and a 44% very satisfied rating.
- Of the people surveyed, 0% of credit union members reported not being satisfied. In contrast, 5% of customers at global banks reported not being satisfied while 1% of regional bank members said they were not satisfied. Customers of direct and community banks report a not satisfied level of 3%. Top 50 and regional bank customers have higher disaffection levels because of the high fees they incur from these types of banks.
The survey also measured the median satisfaction levels of all those financial institutions:
- Credit unions averaged 3.51 out of 4
- Direct banks averaged 3.3
- Community banks averaged 3.15
- Regional banks averaged 3.04
- Top 50 global banks averaged 2.85
The same Gallup poll also found that customers wanted their bankers to engage in personalized consultative sales. When this step takes place, it deepens the bond between a banker and a customer.
A perception exists that national banks do this better because certain bank employees always have to cross-sell to meet numbers.
However, the same Gallup poll found that credit unions have a higher conversation rate of 57% compared to community banks at 52% and national banks at 47%.
Additionally, credit union members seem more comfortable having conversations about their financial goals. The Gallup poll found that 88% of credit union members sought out these conversations compared to 61% of bank customers.
These figures support the notion that credit unions put in the hard work and needed time to develop trust. Credit unions build consultative and personalized relationships with their members.
The poll also found that credit union members were more likely to purchase investments products when engaged in a conversation about them when compared to national branch-based customers.
These results support the community-first approach to banking. Members feel valued and listened to. They also receive more personalized attention.
These studies bolster the notion that customers view their credit unions as an extension of their communities – this builds a collective group identity among members and credit union staff.
Credit Unions Offer Something for Everyone
Credit Unions offer products and services that national banks cannot. Whether you want to gain a better interest rate from your checking account, need to open an account for the first time or have poor credit and need to establish one, credit unions provide ways to meet the banking needs of almost everyone.