Most people enjoy the thrill of finding a bargain, and that includes consumers who are shopping for financial products.
One area credit union customers seem to have an advantage over their bank counterparts is in the area of free checking.
A recent survey by Bankrate.com revealed 84% of credit unions don’t charge their customers monthly maintenance fees for checking accounts. That rate is more than double the percentage of banks that offer free checking accounts to consumers.
The survey further discovered credit unions generally charge less for out-of-network ATM fees as well as overdraft fees compared to most banks.
So how can so many credit unions offer their customers no fees on certain products and lower fees for other services when compared to most banks?
“Free checking has long been a staple at credit unions – well before it became fashionable to offer free checking at banks,” said Greg McBride, senior vice president and chief financial analyst at Bankrate.com. “Given the not-for-profit nature of credit unions, they’re able to offer benefits such as free checking, lower rates on loan products, higher rates on deposits, and fewer and lower fees overall to their members.”
Mike Schenk, vice president of research and policy analysis with the Credit Union National Association, said the Bankrate.com survey results are “in line with the results of surveys conducted by CUNA that reflect the benefits of credit union membership.”
“Credit unions provided $10 billion in financial benefits to their members in 2016, such as free checking, higher rates on deposits and lower rates on loans,” he said.
Credit unions can offer attractive terms on their products due to the major structural difference in corporate ownership between banks and credit unions. Banks are owned by outside stockholders, whereas credit unions are owned by their members, according to Schenk.
“When banks make a profit, it is passed onto their shareholders,” he said. “When credit unions make a profit, it’s passed on to their members with lower or no fees on ATM transactions and checking accounts, lower rates on loans and higher rates on deposits. Some credit unions will take their profits and offer a bonus dividend at the end of the year or a rebate on loans.”
Schenk said most credit unions offer free checking, and the small percentage that don’t typically will offer free checking with a minimum balance.
Dana Vas Nunes is senior manager of deposit products at Alliant Credit Union in Chicago, which has approximately 330,000 members and is predominantly a digital credit union with only 12 brick and mortar branches.
Alliant offers a wide range of digital services such as digital direct deposits, digital money transfers, ATM withdrawals and deposits, and smart phone and tablet deposits, Van Nunes said.
“Alliant will do whatever we can to help our members, including eliminating or reducing fees,” she said. “We’re also unique among credit unions – we don’t accept cash or cash checks – and with fewer branches, it lowers our overall costs. We pass the savings on to our members.”
Vas Nunes said many banks offer initial teaser rates for free checking accounts, then raise their rates later.
“Alliant offers free checking plus interest for members who meet two criteria; [they] have a minimum of one monthly electronic deposit into the account and opt in to receive electronic statements instead of paper statements – and no minimum balance is required,” she said.
Alliant also offers ATM rebates of up to $20 per month for out-of-network ATM usage and rebates are deposited into accounts nightly, according to Vas Nunes.
“We don’t charge any ATM fees for using a credit union ATM,” he said. “Our philosophy is to keep things simple, we don’t want our customers to jump through hoops to save money. We focus on keeping costs low and member experience high.”
While credit unions can offer some products for a lower cost than banks, McBride noted that many banks may be able to offer more diverse and varied product offerings.
“Credit unions offer lower fees and no fees on some products; however, they may not have as robust of a product line as banks,” he said.
McBride said Bankrate.com’s survey results “illustrate why consumers need to include credit unions in their search when credit shopping.”
“A credit union may not always be the best fit for everyone; however, if you’re seeking the best deal, you must cast a wide net when shopping and looking at all your options,” he said. He said in addition to credit unions, consumers should also consider smaller community banks and online banks who may also provide competitive offerings.
Freelance writer Carole Jakucs contributed to the writing and research of this article.