Saturday, November 5, 2011

Are Credit Unions Really Any Better Than Banks?

I've had a credit union account for over 21 years. With Bank Transfer Day upon us, many people will be moving their money out of big banks and into smaller credit unions. I am certainly no defender of banks. In fact, I have a saying that "There are no good banks, just some that are less bad." But I am not willing to give credit unions a free pass just because they are not-for-profit. I am simply not convinced that credit unions are any better than banks.

I regularly publish the money market interest rates of several financial institutions. There is one credit union on my list: Western Federal Credit Union. I have maintained an account at Western FCU (and at it predecessor credit union) since 1993. Regrettably, in my updates going back to 2008, Western has consistently scored in the lower half of the financial institutions that I track. This is certainly not a convincing argument for Western FCU.

In order to provide some additional points of comparison, I added a couple of credit unions that advertise quite heavily in my local area: Travis CU, and Patelco Credit Union. A bit of history: Patelco is the credit union for the company currently called AT&T (formerly SBC (formerly Pacific Bell (formerly Pacific Telesis Group (formerly Pacific Telephone Company)))). Thus, the name Pa-Tel-Co Credit Union. Anyway, I've digressed. So, I compiled an interest rate list for these credit unions, and a few selected banks.

0.89% Ally Bank Online Savings
0.76% EverBank Yield Plus Money Market
0.45% Western FCU Money Market
0.10% Citibank Savings Plus
0.10% Travis CU Flexible Money Market
0.06% Patelco CU Money Market Account

The two new credit unions are approximately on par with Citibank! And Citibank is pretty much at the bottom of the heap as far as banks are concerned. I realize that interest rates alone are not the only comparison point. There are, of course, customer service issues and fees. Thankfully, I am very careful about the types of accounts that I open, and have been able to avoid bank fees.

As far as Western FCU is concerned, I still have a sizable balance with them. However, they did close the one branch near my home (the next closest branch being a 30 mile drive away). And, they can be just as inflexible as the big banks on some matters.

But to sum things up, I am not particularly loyal to any bank. I will transfer my bank funds to a credit union if somebody can show me a credit union that I'm qualified to join, and has savings rates as high as Ally Bank, or branches that are as convenient as Citibank. In the end, I guess that I won't be transferring my money today after all.


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