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Overview: What Are Credit Unions?
Consumers who are having trouble deciding between banks and credit unions may be wondering why they may want to choose a credit union over a bank.
Although credit unions and banks serve similar purposes, they are not entirely the same. Credit unions are not-for-profit, while some big banks bring in profits of billions of dollars each year. While banks have customers, credit unions have members. Credit unions are unions, member-owned, cooperative, and created to serve a certain community.
These member-owners make decisions about how the credit union is run. Due to this, credit unions are often smaller than traditional banks. Additionally, since credit unions are member-owned, they may have more incentive to provide a positive customer experience.
Who Do Credit Unions Serve?
Most credit unions are intended to serve a specific community and have requirements in order to become a member. There are credit unions for certain professions, for military service members, for employees of a certain company, for friends and family of the people who work at the credit union, or for people who live in a specific geographic area.
What Are the Advantages of Credit Unions?
There are several advantages to choosing a credit union over a traditional bank. One advantage is that because credit unions are member-owned, they may provide better customer service and be more incentivized to provide better benefits to members. Credit unions also often pay higher interest rates to members on their checking accounts and saving accounts than traditional banks. Additionally, while banks often charge monthly maintenance fees on these accounts, credit unions may be less likely to do so. Credit unions may also have lower fees for overdrafting accounts than banks.
Credit unions may also provide additional benefits meant to benefit their community. These benefits may include financial education and outreach or special programs meant to help with small business needs.
What Are the Disadvantages of Credit Unions?
There are also some disadvantages of credit unions. While large traditional banks may have more branches and ATM locations, smaller credit unions may only have one branch, and as few as zero ATMs. Due to this, credit union members who use ATMs to withdraw cash or make other transactions may be hit with more frequent fees for using out-of-network ATMs.
Credit unions may only be able to offer a smaller number of financial services. While some large banks are able to offer several different types of checking and savings accounts, credit cards, and loan and investment products, credit unions may have more limited options when it comes to these services.
Additionally, due to their relatively small size, some credit unions may have clunky websites or only offer limited online banking technology for members. Credit union members may need to go into an actual branch more often than customers of traditional banks.
Credit Union Legal Issues
Although credit union members often report being more satisfied with their financial management than customers of traditional banks, some legal issues with these unions have arisen. According to some consumer reports, some credit unions may be charging inappropriate or deceptive ATM fees.
What are Credit Unions Accused of?
Some credit unions have been accused of hidden fees. When consumers attempt to withdraw funds or make transactions using an ATM that is out of their network, they may be assessed two fees. The first fee is by the bank that owns the ATM. The second fee may be from their own bank or credit union. Although it is legal to charge fees for using an ATM, credit unions and banks are required to notify consumers of these fees before they are assessed. Generally, this happens by a small pop up opening on an ATM screen, disclosing the amount of the fee, and prompting the user to accept or deny the fee in order to complete the transaction. If this disclosure is not made and a fee is charged, consumers may be eligible to pursue reimbursement.
Credit Union Lawsuits and Settlements
If you have been assessed a fee when using an ATM and were not warned about this fee before it was charged, you may be able to speak with an experienced attorney about your legal options. Some victims of deceptive ATM fees may be able to recover reimbursement or additional compensation for these fees.
