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Is one better than the other?

I've noticed that national banks seem to charge more (and higher) fees. Is that just me?

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2 Answers 2

up vote 7 down vote accepted

George's answer is excellent.

To expand a bit on "which is better", just based on my experience with a handful of regional/national banks and a couple different credit unions:

  • Many credit unions are small, local banks.

    • This can be great if you want a personal relationship with CU employees -- you may be able to get flexibility when applying for a loan, for example.
    • The downside is they may not have hours that are as convenient, the online banking may be missing features (or just plain missing), etc -- they just don't have as much in terms of resources as large national banks.
    • They may not belong to a large ATM network. If you use your ATM frequently you'll pay more in fees at the terminal.
    • They may not have a "call center", staffed 24x7, by people "far away". You decide whether this is good or bad.
  • Larger credit unions have more resources to cancel some or all of those downsides, but then they have more fees.

  • Large national banks have branches all over, ATMs everywhere, are open at the supermarket on weekends and evenings, and have really slick online banking. You pay for this (sometimes excessively, it seems) in fees. When you have to talk to someone, you may be lucky enough to have a personal relationship with someone at your local branch, but you are just as likely to get a drone at a call center who is powerless to actually fix anything for you.

  • Everything I said above for small credit unions goes for small, local banks.

What's "better" or "worse" depends on which of those things above are more important to you.

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Note that some credit unions (and online banks, or small local banks, for that matter) offer rebates of ATM fees charged by other institutions' ATMs. –  fennec Aug 15 '10 at 15:57
    
@fennec: Believe it or not, I've gotten that type of rebate from Citi after using a prepaid card at an ATM. Citi's "locate an ATM near you" feature located an ATM with a $2 service charge, but said charge is deducted when I withdraw from that ATM. –  Joey Adams Aug 18 '10 at 2:01

A credit union is a cooperative financial institution that is owned and controlled by its members and operated for the purpose of promoting thrift, providing credit at reasonable rates, and providing other financial services to its members. Many credit unions exist to further community development or sustainable international development on a local level.

http://en.wikipedia.org/wiki/Credit_union

Basically, it's a bank owned by its members. For the purpose of your question, regarding fees, you may think of a credit union as a "non-profit" bank.

Credit unions may also be thought of as being similar to an utility (or other) cooperative.

To expand a bit more:

A bank, whether privately or publicly owned, is a capitalistic undertaking, intended to make money for its owners. A credit union is a more "altruistic" endeavor. They can not operate at a loss, but their reason for being is less about profit and more about helping its depositors; who are all part owners.

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6  
Good answer. And when it comes to mutual fund companies ... the "credit union" variety of those is Vanguard. They also have low fees because they are owned by and run for the benefit of fund unitholders, not outside shareholders. –  Chris W. Rea Aug 15 '10 at 1:49

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