Should You Switch from a Bank to a Credit Union?

By Donna Fuscaldo | Bankrate.com

Credit unions gain as an alternative

Shopping for a new loan, or a savings or checking account? You have more options than you think. Banks are the predominate place people park their money or get their loans, but credit unions are growing in popularity as consumers thumb their noses at credit unions’ big brother.

According to a March 2012 survey of 5,000 consumers conducted by Pleasanton, Calif., market research firm Javelin Strategy & Research, 11 percent of respondents indicated they would switch their main financial institution during the year. For the first quarter of 2012, membership increased by 667,000, reports the National Association of Federal Credit Unions, an Arlington, Va., trade association.

Although credit unions are an alternative to banks, a decision to switch depends on what you want out of your financial institution. For some consumers, low rates on loans and higher rates on savings accounts are all that matters. For others, it’s all about convenience or accessibility.

“Banks may offer a better opportunity if you need a more sophisticated lending product or investment product,” says Gene Kirsch, senior financial analyst at Weiss Ratings, a ratings firm in Jupiter, Fla. “For everything else, you’re best to shop around. Credit unions are very competitive.”

Who owns banks and credit unions?

One of the major differences between a bank and credit union is its corporate structure. Banks are for-profit institutions, which means they are in the business to make money and have shareholders to placate. Credit unions are nonprofit and are owned by the members of the credit union, which means their focus is on serving the members.

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