Are Credit Unions the Way to Go?

Are Credit Unions the Way to Go?
  • Opening Intro -

    All of the brouhaha surrounding commercial banks, government bail outs and high consumer fees has plenty of people up in arms.

    The Occupy Wall Street movement has latched on to that discontent, supporting various “bank transfer days” where consumers are urged to move their funds to credit unions.


College students have banking options available to them.

The most recent bank transfer day was held on November 5 and was backed by the credit unions.

Credit unions have been an option for millions of consumers for more than a century, and are not-for-profit financial institutions owned by its members. By federal law, membership is not open to the general public. Rather, people join credit unions through their employer, through their church or social organization, and in some cases through their community. Still, more than 90 million Americans belong to credit unions, a number that is rising steadily. Like banks, credit unions are federally insured, offering the same level of financial security consumers desire.

Economic Democracy

For college students, the appeal of a credit union may be a strong one, in that these institutions are an “economic democracy,” giving each member equal membership and one vote, regardless of the money a member has invested. Each institution is governed by a voluntary board, comprised of directors who are elected by its members. Credit unions also pay taxes and its members enjoy lower loan rates, higher interest on deposits and lower fees than banks which must pay dividends to its shareholders.

If you are college student and are in need of a bank, should you consider a credit union? Perhaps. A credit union becomes a valid option for students attending colleges and universities that have set up a credit union to benefit students and faculty. For example, the Princeton Federal Credit Union serves the Princeton University community, by offering free checking accounts with no minimum balance required and provides free checks according to Forbes.

ATM Access

Of course, a big concern for students is access to automatic teller machines – ATMs – as these machines are a popular way for consumers to handle transactions. Fortunately, credit unions typically belong to national or shared networks of ATMs whereby members can withdraw cash without a fee.

Forbes reports that the Co-Op Network, with more than 28,000 ATMs across the country, allows members to withdraw cash and make deposits without a fee. Keep in mind that if you do go out of network, you’ll have to absorb those fees.

Credit Rating

Credit unions can also help students build their credit rating. Some are lenient when it comes to making late credit card payments, giving students up to seven days grace before a late payment affects their credit. Moreover, ongoing membership in a credit union and can help students build up their credit, enabling qualified grads to get a car loan or a mortgage at a rate lower than a commercial bank. Some students maintain both a campus credit union account and an account with a commercial bank, the latter making it easier for parents to transfer funds as needed.

You may also be able to secure a much-needed student loan through your credit union. This option is appealing to students whose bank no longer has a student loan program. However, these loans are private which means you’ll pay higher interest rates than those subsidized by the federal government reports SmartMoney. You can also expect to have your credit score checked, therefore if you have a history of bad credit, a credit union just like a bank, will assess your creditworthiness before making a decision on your loan application.


Credit Union National Association: What is the Credit Union Difference?

Forbes: When A Credit Union Beats A Bank; Esther Yi; August 26, 2009

SmartMoney: Should You Tap Credit Unions for College Loans?; Annamaria Andriotis; January 13, 2010

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