Bank of America may have back peddled on their proposed $5 fee for debit card users, but bank fees can't be completely avoided. There are fees for having too little in savings or talking to tellers too much. You can be slapped with a fee for transferring funds too many times or using the wrong ATM machine. Some experts say there is a way to avoid bank fees: switch to a credit union.
While they perform many of the same services, here are several key differences between banks and credit unions. According to credit union expert and Your Marketing Co. President Bo McDonald, at a credit union you're a member, not a customer. Each member has one equal share of ownership in the credit union no matter how much or how little you have on deposit, he says.
Since credit unions are non-profits, any profits are passed on to members in the form of lower interest rates. "I refer to it as banking for Main Street, not Wall Street," says McDonald.
Fees Could be Lower with Credit Unions
Fees are still a possibility at credit unions, but McDonald says they are much lower and there aren't as many. "The credit union mantra since the very beginning has been 'Not for profit, Not for charity, but for service,'" he says. In fact, since widespread news of big banks tacking on new fees McDonald says credit unions have seen a surge in new accounts being opened. And some are doing it very publicly as a way to express their dissatisfaction with big name banks. One Fox News anchor even cut up her Bank of America debit card live on the air and proudly announced she was joining a credit union.
Most community credit unions do offer debit cards and in most cases it's a free service. "Some believe that because credit unions may not have as many locations as a big bank it's not convenient," says McDonald. "Look for a credit union who is a part of the co-op network. You'll have access to over 30,000 ATM's across the country free of charge." If you become a member of a credit union you'll definitely want to download the free Credit Union Shared Branching Locator app. It will help you find a location and an ATM no matter where you end up.
Credit Unions Good for Bad Credit
For those with less-than-perfect credit, making the switch to a credit union could be a good idea. Not only do many credit unions offer free financial counseling, they also typically offer special accounts for those who have been denied a checking account at other financial institutions because of bad credit. Interest rates are typically capped at 18% APR at credit unions. "If you have loans somewhere else (including payday lenders or title loan stores) credit unions are typically very helpful in finding ways to help refinance higher interest loans from other lenders," says McDonald. "For those who are experiencing financial difficulties, a local credit union may be the perfect place for a fresh start."