Banks get a pretty bad rap for a lot of well-deserved reasons. Credit Unions are an attractive alternative, but that doesn't mean you're guaranteed an easy life. Here are some of the biggest problems with credit unions, as well as how to fix them.
For the uninitiated, credit unions are bank alternatives that are member-owned and don't have the typical for-profit structure of most banks. They also have specific requirements for entry, which means not everyone can get in. This often results in some consumer-friendly practices like low fees and interest rates, but it also means credit unions are more regionally-limited, have less capital to keep up with big banks, and can't afford all of the perks. Whether or not a credit union is right for you is another topic, but here are some of the speed bumps credit union users might hit.
Low Budget Means Low Tech
Smaller credit unions often don't have the funds to invest in modern computer systems. Smaller companies' mobile sites and apps frequently suffer in this department because a state-wide credit union may not be able to risk the investment in developing the same competitive services that a larger bank offers. With a higher need for security than most apps, complex features like check scanning, and fewer resources to throw at it, most credit unions aren't exactly known as bastions of technological innovation.
The solution: If your credit union doesn't have decent software, don't bother relying on it in the first place. Lifehacker readers have expressed their love for Mint and YNAB (among others). Support for Mint among credit unions is a bit scattershot, but many users claim that it works reasonably well for day-to-day transactions, if not other financial services like loans.
If your credit union doesn't specifically support Mint, YNAB offers many of the same financial management tools, without the need to tie directly into your financial institution. You can manually enter transaction info (which is a chore, but better than nothing) and analyze your habits. The software doesn't come free, but it's more than worth the cost.
Regional Credit Unions May be Inaccessible in Different Areas
If you wake up every morning and head to Starbucks to get a coffee, you can keep your morning habit when you're traveling. There's bound to be another Starbucks on literally (not figuratively) every street corner in existence. The same goes for bigger banks. You're more likely to find a Chase bank in another state than you are to find a branch of your local credit union.
The solution: Try to find a branch in a co-op. A credit union co-op is a network of branches for various different credit unions that allow members access to services with each other. As an example, CO-OP Financial Services is the largest group in the United States, consisting of 3,500 individual credit unions, and 5,000 branches throughout the United States. For comparison, Chase bank has 5,100 branches throughout the US.
Even if you're already part of one credit union, you can usually find out if they're a member of an existing co-op on your credit union's site, or by asking inside one of your known branches. If you haven't already tried to find alternative branches, you may be surprised just how many there are. As a personal example, I found 56 new co-op branches that offer services to my Georgia-only credit union.
Credit Cards Often Have Lower Rewards
Using credit cards with rewards isn't a universally-advised strategy, but if done right, you can save some money. The trouble is that while credit unions typically have pretty decent interest rates (being member-run, there's less motivation to gouge users), they also don't have the budget for generous rewards.
The solution: Rewards cards do not have to be issued by the bank or credit union you're currently using (obviously). We've already talked about some of the best credit cards for their rewards. The Amazon Rewards card won out that battle, and its issued via Chase. To a certain extent, big banks and credit unions can live together in harmony.
More importantly, recognize that using a credit card for the rewards and using one for a low interest rate are, with rare exception, entirely separate tasks . Rewards cards encourage high rates of activity, which is only advisable if you can pay off your credit card immediately. A credit card with a low interest rate is designed to let you pay off a large purchase over time without paying a ton of extra money.
In general, it's smart to have at least a few open credit cards. Not only does it build your credit to have long-standing accounts, but by spreading out your credit over multiple cards, you maintain a better credit utilization score. Credit unions have attractive credit card offers due to their low interest rates, which makes them more-suited for larger purchases (especially if you can get a no-interest deal). Rewards cards are good for the day-to-day purchases you can pay off immediately. Ideally, you'll have both open and use them for the correct task.
ATMs May Be Harder to Find, or Cost More
Also due to location restraints, credit unions don't have as many ATMs available without charging fees. Co-ops and ATM networks help in this regard, but it's still easy to find yourself in a situation where you need to withdraw money and the only thing near you is an ATM with an annoying fee.
The solution: The easiest way to avoid ATM fees is to avoid ATMs altogether. One surprisingly overlooked strategy is to utilize stores with cash back offers to withdraw money from your account. You still have to make a purchase, but buying a pack of gum is usually cheaper than most ATM fees. Plus, you get gum. Or, you can withdraw cash during your normal shopping. Most stores don't charge money to get cash back, and the transaction functions almost identically to a withdrawal from an ATM. Easy peasy.
In the event that you still have to use an ATM (it happens to everyone), many credit unions offer ATM-reimbursement fees. Like co-op branches, this feature isn't advertised very well (for obvious reasons), but you can often submit a form with your credit union to ask for a reimbursement on your ATM fees.
Photos by Matt McGee, Images Money, and Jordan Sim.
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