Kristine Tanzillo, a 58-year-old marketing and public relations specialist, wanted to earn more interest on her savings. Instead of choosing a well-known or online-only bank, she chose a smaller in-state credit union. And she's never looked back.
Compared to other big-name banks, credit unions are often overlooked. These member-focused financial institutions usually offer physical branches, live customer service and even mobile banking to help manage your money just as you would with a local or online bank. Many even offer financial literacy programs for their communities.
Credit unions also offer competitive rates on savings accounts, car loans, mortgages and other consumer products. “Our credit union has given us such great service and rates over the years,” said Tanzillo. “To me, there's some loyalty there.”
Here’s why you might want to consider switching to a local credit union, too.
Savings rates are still high at credit unions
Unlike banks, which are owned and operated as for-profit companies for their shareholders, credit unions are not-for-profit organizations that funnel their earnings back into the financial institution to benefit their members. They usually don’t charge hefty fees like big banks, but many still offer physical branches and the same banking services -- like mobile check deposits, ATMs and high-yield saving products.
Even in light of the Federal Reserve’s latest decision, many credit unions offer over 5% annual percentage yields for short-term CDs, and have lower loan borrowing rates.
Local credit unions often have strong community ties and focus on ways they can optimize the financial well-being of their members, said Ligia Vado, senior economist for America’s Credit Unions. This might include investing in local businesses, supporting community development endeavors or participating in charitable events.
Since credit unions' profits are often diverted back into the financial institution in the form of higher savings rates or lower fees, they may be a better option than a big bank with high fees and paltry savings rates. It’s one way credit unions give back to their members, added Drew McKone, chief deposit officer at State Employees’ Credit Union. Some credit unions will even match rates that other financial institutions offer.
Tanzillo previously had a car loan, credit card, mortgage and CD at Texas Trust Credit Union. But when she moved away, she turned to a nearby bank for her everyday money needs. When she was contemplating opening another CD, she found her new bank wasn't offering competitive rates and wouldn't match Texas Trust's high CD rate.
“I decided to go back to Texas Trust, who already had our other CD, and they had a really good rate,” said Tanzillo. She opened a new 12-month CD online with a 4.44% annual percentage yield and renewed a 13-month CD with a 5.18% APY.
It's easier to become a credit union member
The one downside to credit unions is that most have eligibility requirements to join, such as being a resident of a county or a member of an organization. And you don't have to physically go to the branch to open an account, in most cases.
Since Tanzillo no longer lives close to her hometown credit union, she wanted to make sure it wouldn't be difficult to open a new account. “The biggest deal for us was making it easy because we don't live near the credit union," Tanzillo said. She was able to open a new CD online with the help of a Texas Trust representative and complete a wire transfer to fund her account without visiting the branch.
Even if you don't qualify to bank at a local credit union, you can consider a national credit union with less strict eligibility requirements. For example, you can open an account with Alliant Credit Union if you become a member of Foster Care to Success. Alliant will pay the one-time membership fee on your behalf.
Credit unions are more tech-savvy now
If you're worried switching to a credit union will leave you with less-than-desirable digital banking tools, you might be surprised at what you find. Many credit unions have the same online features as popular online banks, such as mobile check deposits and bill payments. And 51% of credit union members responded "very positively" when asked if credit unions provided the necessary technology for online banking, according to a 2022 America’s Credit Unions’ survey.
Since the COVID-19 pandemic, many credit unions have amped up their online presence to help people manage their money without visiting a branch. “[The pandemic] created a demand and accelerated innovation for online banking to be user-friendly, intuitive and effective,” said McKone. Last year, 45% of new State Employees’ Credit Union members opened an account online, rather than in our physical branches, said McKone, noting that in past years, that number was much lower.
"Credit unions sometimes do lag behind in technology,” said Tanzillo. But now she can easily see and manage her accounts via mobile app.
How to find a credit union near you
There are over 4,700 credit unions across the US, but to find the right fit for you, start in your local community. You can use the National Credit Union Association’s Credit Union Locator to find a credit union in your area. The tool also shows if there’s an ATM, shared service center and drive-through assistance available. As you narrow your search, remember to check membership requirements for eligibility.
Regardless of which credit union you choose, make sure that you’re comfortable with any account requirements and fees. Most importantly, make sure the account is insured by the NCUA to protect your funds up to $250,000 per account category in case the credit union fails.
