Is a Credit Union For You?

             More banks failed last week, bringing the total to more than 130 so far in 2010, compared to 140 all of last year and a mere 25 in 2008. Sure the big banking guns got bailed out, but many smaller institutions have had to make their own way in an up-down, up-down economy. With all the drama surrounding banks maybe you’re thinking it’s time to look at what credit unions have to offer.

              Here’s what you need to know.

             Membership has its privileges

             A key difference between credit unions and banks is that a credit union’s shareholders are its members (and each member has one vote), while a bank is owned by its stockholders.

            A bank earns profits and distributes those profits to stockholders. A credit union’s “earnings” are returned to its members in the form of lower fees, higher dividends, better rates and more services, says Jessica Lewis, a spokesperson for the National Association of Federal Credit Unions.

             Advantages of credit unions

             William Pitney, a certified financial planner with William Pitney Advisory Services holds accounts with both commercial banks and credit unions. He prefers credit unions. Why? “Lower and fewer banking fees. I never feel nickel and dimed for a variety of transactions.” Secondly, “I’m never routed to some call center where the representatives treat me like just another account holder.”

            Then too, he says it’s about the savings. “I have consistently had better rates with the credit union than the bank. I’ve had car loans and mortgages with both types. The closing costs and document fees are lower with the credit union.”

            Simply put, he says, “Banks put profits first and credit union put members first. Banks roll out additional services to make money first and often discount what account holders may want or need. Credit unions explore whether to offer services due to demand from members and determines how to integrate them.”

            Small business owners in particular might want to look at credit unions. “They do manual underwriting, so they can understand issues with low personal and business scores. They are more flexible than the big banks,” says Rohit Arora, CEO of Biz2Credit, which connects small business with financing options.

              Arora says the decision-making process can be quicker at credit unions.

             Where banks might have an edge

             But banks do have some advantages. They might be more apt to have websites with bells and whistles, 24-hour customer service lines and an abundance of branches. One drawback with credit unions is that they  cannot lend more than 12.5 percent of their capital, says Arora.

            Then too, if you’re a small business looking of a big loan, you might be disappointed to learn that credit unions can have low lending loans, typically from $15,000-$150,000 says Arora, and you must be a member.

            So when it comes to the battle of the banks vs. credit unions there’s no clear winner. Truth is, you might want to divvy your funds and enjoy the best of both.