In reaction to the financial crisis, the Federal Government instituted changes within the financial industry. Banks have reacted to this and passed along some of the expenses associated with the new regulations, even things like maintenance fees to simply have a bank account. Many bank customers are unsure of where to turn when dissatisfied with their bank. They end up staying because getting over financial inertia is difficult, even when it is in their best interest to find a new institution to bank with.
Alternatives to National Banks
In addition to the major banks located conveniently all over the country, there are a few alternative options people often look to when wanting to make a change.
Community Banks
Small community banks are known for their more flexible lending options and cheaper fees for regular bank activities than their global counterparts. Community banks are the right choice for many customers who want to make the switch.
Community banks do have many options available that can convince a consumer to stray away from the larger banks. Popular lures including free checking accounts and special interest rates. These promotions bring customers (and deposits) in and keep the smaller banks competitive. Another plus for smaller community banks is the personal service customers tend to receive in a smaller bank. While national banks push online options and call center representatives on customers, small bank branches know your name when you walk through the door.
Credit Unions
While a lot of consumers may be familiar with credit unions, many have no idea if they are eligible for such an account nor do they realize the benefits of opting for a credit union account. Millions of Americans are active with credit unions and it may be the ideal banking choice for you.
Benefits of Banking with a Credit Union
Lower Fees
Consumers of larger banks have likely noticed increased fees and decreased availability of free checking and savings accounts. For people who are worried about the ongoing expense of maintaining a basic bank account, credit unions can be the right solution. Credit unions operate as a member-owned entity. Essentially they are non-profit and not focused on making high profits like a traditional bank. Credit unions may charge a low monthly fee to maintain an account. However, when compared to national banks, credit union fees are drastically lower across the board. Account maintenance fees, if they exist, as well as overdraft fees, and other penalties are priced much lower than bigger banks.
More Flexible Lending
If you are looking for a personal loan, auto loan, or a home mortgage, a credit union may be a good place to turn first. While the rates offered are still based on credit histories and scores, credit union underwriting may be more flexible. For those with credit issues in the past that traditional banks and lenders will find difficult to overlook, credit unions in general may be more willing to work with borrowers as they are members of the same community.
Community Pros
When banking with a credit union, the money essentially stays within one’s own community. Credit unions are member-owned so there are different priorities than massive profits. Profits that are earned are put back into the credit union which translates to bigger savings for members.
Credit Availability
Consumers looking to secure a good credit card deal may be surprised to find what they are looking for at a credit union. While credit scores still determine credit card eligibility, consumers will find different programs and underwriting at a credit union. Those with financial hardships on their record may also find approval ratings are higher than would be at a traditional bank.
Building New Credit
For younger customers that have not had much time to build up a significant credit foundation, a credit union can be beneficial for establishing good credit. Larger banks will consider younger customers without strong credit backgrounds, such as college students, as more of a risk. This means those just starting out on their adult financial life will pay more in interest rates and fees if they use a traditional bank. The non-profit aspect of a credit union will invest more time in educating new consumers about finances while providing adequate options.
How to Find the Right Credit Union
There are many resources you can use to find a credit union. Start with your employer and see if there is a credit union that caters to your chosen profession. Teachers, military members, and healthcare workers are just some professions with specialized credit unions.
If you do not have, or are not interested in, a profession-based credit union, you still have options. Many credit unions state they serve a certain city or counties surrounding a city. You may not think you qualify for membership, but simply driving by many of the credit union branches every day on your way to work can make you eligible. If they are in your area, you have a good chance of eligibility.
Not sure if you qualify? It is best to find a few credit unions in your area and make some phone calls (or stop by a branch) to address your questions and concerns. It might be helpful to come up with a list of questions you’d like to address before the call. Based on the fees and the services they offer, you should be able to make an informed decision if a credit union is the right choice for you and which facility is a good match for your financial needs.
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Tisha Tolar is a co-owner of Trifecta Strategies, LLC and the author of Gen X. When she is not busy being a fiction writer, she writes personal finance articles for several web sites, including Moolanomy.com.
I do not bounce checks or do any other activity that would cause me to be charged bank fees. So lower fees do not entice me. As much as I do not like BofA, they have the best online bill pay interface (IMHO).
I ditched BOA for credit union and the bill pay is just fine but I used to be just like you Mark… stayed for the cool bill pay interface until I realized how horrible they are first hand. And how much they really don’t care.
I haven’t ditched BoA because no one else can match their ATM network and I move frequently. Like Mark, I also haven’t incurred any fees with them. I also keep the majority of my money in an online savings account since their rates are much better.
@Mark: What if you could earn more interest elsewhere?
@Alex: Thanks for stopping by.
@No Debt MBA: Interesting take. Had you run into ATM network availability elsewhere? All of my banks refund ATM fees, and I hardly use cash anyways, so that has never been an issue for me.
When I originally opened the account BoA was the only bank that had locations in both my hometown and my college’s area. You’d be surprised how many “national” banks lack branches in major markets. Citi, Wachovia, Wells Fargo and others have all lacked ATMs in at least one of the cities where I’ve lived.
I could switch to Ally or another bank that refunds ATM fees but so far I’ve been too lazy and the benefit hasn’t seemed to be worth it.
If you’re concerned about location and ATM access, you should know that many credit unions belong to national networks and alliances that allow you to access your account anywhere. For example, Shared Branching has over 4,000 locations nationwide. There’s also an ATM Alliance that’s nationwide.
You can learn a lot more about credit unions and find one for you: http://www.asmarterchoice.org/ and also http://www.mycreditunion.gov/Pages/default.aspx.
@No Debt MBA: It’s most interesting to me how we let old habit and inertia keep us from making changes. The change may not be a huge difference maker for you here, so I’m not pointing the finger. Inertia impacts me as much as anyone else. But it makes me wonder where else we might look, and go “Eh, that’s too much trouble to change” when it really would help us out.
@KelseyB: Great links!