Consumers may need no further proof that a credit union is a money saver after hearing the latest results from a study conducted by Bankrate.com.
Bankrate.com surveyed both banks and credit unions and found that over 70% of U.S. credit unions offer free checking versus only 39% of banks. Although not surprising, Bankrate researchers found that free checking wasn’t the only reason consumers were fleeing big banks for a credit union. In addition to not having to deal with monthly maintenance fees, overdraft fees at credit unions averaged $26.74 versus $31.26 at banks.
Why so different? Steven Bugg, chief marketing and member service officer at Heritage Federal Credit Union ($441.7 million, Newburgh, IN) breaks down the difference. “Big banks are ‘for profit’ and need to satisfy their stockholders,” he explains. “Credit unions are ‘non-profit’ and ‘member-owned’ and thus can offer reduced fees and better rates since the profit the credit union makes is returned to its loyal members in terms of those reduced fees and better rates.”
“Big banks are not focused on necessarily serving the needs of their customers while credit unions look to provide the products and services to our loyal member-owners that they need and desire in order to build the relationship with them,” he adds. “This in turn will increase the share of wallet the member has with the credit union making the relationship grow and become a profitable household by deepening the overall relationship by getting to know our member's financial needs.”
Bugg explains that credit unions typically offer their members lower service fees for maintenance of accounts in addition to totally free accounts along with lower penalties for overdraft and non-sufficient funds. “My advice to consumers is to conduct your research by looking at the fee schedule for your financial institution prior to opening up your account along with making sure the account you are interested in opening up offers the services you desire from a financial institution. If fees are assessed for services tied to your potential account make sure those are services that you will utilize in the future and you don't end up paying for something that you will not use.”
He adds that most credit union members can typically find multiple checking account options available at their local credit union branch and/or online that range from totally free checking accounts to interest bearing checking accounts. This includes checking accounts with services such as; no minimum / limited balance requirements, no monthly / limited fees or per check charges, access to accounts for free through online banking, telephone banking, mobile banking and check images via online banking, free electronic statements and free bill pay services.
Additionally, account accessibility at a credit union is not as difficult as many consumers are led to believe. “Members may find credit unions offering expanded ATM networks for their debit cards, reimbursement of some ATM fees for non-network ATM usage, shared branching options, no charges for ACH and / or direct deposits, free checks, debit cards, overdraft protection plans and remote deposit capture,” Bugg says. “With the evolution of technology and the cost of technology coming down, credit unions can now compete directly with the big banks by offering services that in the past were only perhaps offered through the mega banks like mobile banking or remote deposit capture.”
Another aspect many consumers ask about is whether credit unions offer reward or loyalty programs. Bugg says that reward or loyalty programs, where members can earn points or cash back (or higher interest / dividend rates) are also prevalent at many credit unions.
One response big bank customers have to this free checking debate is that a credit union can’t provide the same robust product as a bank.
“Credit union checking account holders can expect comparable feature & benefits to a bank, such as online and mobile banking services; some like Alliant, offer the ability to deposit a check from a remote location, such as an office, home or a smart phone,” says Joe McGowean, vice president/marketing and member communications at Alliant ($8.2 billion, Chicago, IL).
“There is nothing large banking institutions can offer in a checking account that credit unions cannot,” Stephen Tabler, vice president/marketing at San Mateo Credit Union ($700 million, San Mateo, CA) echoes. “Not all credit unions do offer everything, but then neither do all large banks. Just like banks, capabilities vary widely and depend upon the membership the credit union serves. The offerings can include debit cards, overdraft protection, online account access, mobile banking access, peer-to-peer transfers, paying interest, ATM fee rebates, and more.”
“Also, I think the issue of whether a checking account is truly free if it requires a minimum balance or set number of transactions is a good question to explore,” Tabler adds. “There’s been a lot of discussion about how some institutions, both banks and credit unions, require certain types of activity to get the fee for an account waived and whether these accounts can be claimed to be ‘free.’”
Ready to save some of your hard-earned cash? Find a credit union and discover which checking product is right for you.By Gina Ragusa