What are the disadvantages of credit unions as opposed to banks?
April 22, 2010 9:09 AM   Subscribe

What are the disadvantages of credit unions as opposed to banks?

After having been recently dunned by my bank for their mistakes, I thought, "Wow, I should check into the laws on recording interactions with customer support people, because I clearly can no longer trust what they say they will do or their records." Then I thought, "if I cannot trust them, why trust them with my money?"

So, what are the disadvantages of credit unions compared to banks? Tell me every weird little negative thing which has annoyed you.

Note: I do not use any fancy-schmancy services. No online bill payment systems, not a lot of transfers. I'm boring; I write paper checks. I just want a landing site for my direct deposit paycheck and the ability to use an ATM. Maybe work with an organization which did not thirst for my blood and scheme for ways to get at it.
posted by adipocere to Work & Money (35 answers total) 9 users marked this as a favorite
I'm a huge fan of credit unions; I've done my personal banking exclusively at CUs since the early 1990s. However, I use a regular bank for my business. I've found that my credit union is inexperienced (to put it gently) at business banking. They are unfamiliar with credit card merchant processing, international wire transfers, and many other tools our regular bank provides us without raising an eyebrow.

If my CU were more polished at business banking, I'd switch in a heartbeat.
posted by workerant at 9:13 AM on April 22, 2010 [1 favorite]

I have found two minor disadvantages to my federal credit union: fewer ATMs than a national commercial bank, and higher mortgage rates. These are minor concerns, especially in light of the many advantages (I have an ATM on my way to work, and I got my mortgage somewhere else, no big deal).
posted by infinitywaltz at 9:15 AM on April 22, 2010

I use a credit union in a rural area, and the major disadvantage is the lack of ATMs. The closest ATM to my house is about 15 miles away. Not a HUGE inconvenience, but definitely annoying.
posted by pintapicasso at 9:18 AM on April 22, 2010

Our very large credit union still holds out-of-state checks for seven days to make sure they clear, which seems pretty dumb/old-fashioned to me.
posted by Sweetie Darling at 9:21 AM on April 22, 2010

Local credit unions may not be able to exchange foreign currency, whereas some large banks will.

Some things need to be done in-person at a branch. If you belong to a large nation-wide bank, chances are there's always a branch nearby, even when you're traveling. With a smaller credit union, it's likely they only have a physical presence in a very small area.
posted by Vorteks at 9:21 AM on April 22, 2010

The ATM thing isn't a huge deal if the credit union you're interested in is part of a network (mine is part of CO-OP Network) but otherwise it can be a huge pain in the ass.

Also, if you go to one of the shared branches (which may be a specific thing to my CU, checks deposited in person can take a few days to clear instead of being done immediately if I were to go to one of the specific named locations.)
posted by sperose at 9:25 AM on April 22, 2010

I know you only asked for disadvantages, but I just wanted to note that many credit unions have taken steps to correct many of the issues listed here. For example many refund atm fees and many belong to credit union networks so you are not limited to the number of branches your c.u. happens to have.
posted by amethysts at 9:26 AM on April 22, 2010

My credit union closes at 2:00, with no weekend hours, and the only ATMs are in my office.
posted by MrMoonPie at 9:27 AM on April 22, 2010

The Internet banking interface can be really clunky at small credit unions. The branch hours can be very inconvenient. The only branch nearby may be inside the federal building with all the assorted metal detectors, ID requirements and bomb squad tomfoolery (probably only my credit union, actually).

All of those things are inconvenient (and I would have been really pissed if the bomb squad actually had cut my bike in half before I got back ... ) but at least they aren't bottom feeding scum/thieves like commercial banks.
posted by ChrisHartley at 9:31 AM on April 22, 2010

I'm in a large urban area with so many credit unions that their various reciprocal agreements give me plenty of surcharge-free ATM options (and 7/11 ATMs are free, too.) ATM availability is only an issue when I travel (and not much of one given 7/11's density.)

My one beef with my credit union is the same as Sweetie Darling's -- whenever I deposit a large check, I'm spinning the check-hold roulette wheel. Depending on the whim of the teller, there may be no hold on the money, 3 business days, or even 7 business days (they've been straightforward that there's no set policy on when it happens.) But I don't know how banks fare on this count.
posted by Zed at 9:36 AM on April 22, 2010

My credit union in Canada is great. I can use the ATM of any CU without fees (there are lots of CU's here), which actually means I have far, far more options than my friends who use a bank. My father's business used the CU without issue. I've honestly always wondered why the heck people would use a bank around here... I'm still not really sure. I realize that this is not the situation in other places.
posted by utsutsu at 9:37 AM on April 22, 2010 [1 favorite]

I switched ten years ago. I've yet to find anything that is worse than a bank. Not one tiny thing. But from what I hear, it depends on the CU. Find a good one.
posted by -harlequin- at 9:41 AM on April 22, 2010 [1 favorite]

I will never, ever ever go back to a bank.

BUT my credit union is a no-cash facility. I cannot cash checks directly at their offices, exchange foreign currency, or do anything else that involves cash. I have to do it through an ATM or another credit union in that magical national credit union network.
posted by whatzit at 9:50 AM on April 22, 2010

In some states, credit unions can opt for private insurance rather than federal insurance - I recently changed credit unions because of this issue. .
ATM availability can be a problem when you're out of town (even with the Co-op network) but a lot of stores will let you do cash back on ATM card purchases.
As others have mentioned, checks can have longer hold times, and the online banking interfaces aren't as slick, although they do everything I need them to do.
The only other minor gripe is that I have to put in a 24-hour request to do a large cash withdrawal (say, taking out two grand to buy a car - something I maybe do once a year)
All of these are more than outweighed by not getting dinged by fees left and right.
posted by zombiedance at 9:57 AM on April 22, 2010

Perhaps they have improved, but my experience with them is that they were amateur banks. Less oversight, less professional, less secure, etc. Kind of like banking with a PTA or condo association.
posted by gjc at 10:16 AM on April 22, 2010

I know you want disadvantages, and I hope you don't consider this a derail, but I've never experienced any disadvantage using my credit union.

They are part of a huge network of credit unions, so even though they are based in Oregon and I'm in Michigan, I can deposit paper checks at an ATM here and they get there fine with no significant delay, and my check deposits are cleared half up to $100 immediately. I have no problem with ATM surcharges except when they're being charged by other banks.

They offer the full complement of personal financial services, including all the frills you don't use and free at that. I admit I am not experienced with trying to transact business banking with them, but I have no reason to believe I'd be disappointed.

Find a good one and hang on to it. They are absolutely worth it.
posted by asciident at 10:20 AM on April 22, 2010 [1 favorite]

I used to do both when I worked at a government owned CU-like institution, but then I had to switch back to a "big 5" bank exclusively. The main disadvantage of the CU in my province (I think both of them) is that I cannot find fee-free ATMs across the whole country. I keep a BMO account primarily because I can withdraw cash equally free in Edmonton and Ottawa, which I could not do with the CU.
posted by Kurichina at 10:26 AM on April 22, 2010

The tech department at my local credit union is unbelievably bad. Nearly every single interactive page on their website has something worthy of thedailywtf.com. They had their email list compromised (so I get spam to my credit union email account), they store your password in plaintext, they show your password to loan officers, the loan officers will gladly recite your password over the phone (while you're on speakerphone) if you forgot it (no he did not ask if it was okay to do this before doing so), your password can't have dashes in it (?!), their login page uses a Flash app instead of a textbox to type your credentials in (bonus: hitting the backspace key in the Flash app erases the entire textbox, not just the last character), they entered my Social Security Number incorrectly when I opened my account (but somehow successfully did credit reporting without noticing?), the list goes on and on. They might not thirst for your blood, but they're not exactly pros at the basic ins and outs of running a modern bank.
posted by 0xFCAF at 10:29 AM on April 22, 2010

My credit union is competent, friendly and I got a better mortgage rate than the bank. When I lived quite near the credit union, they hand-delivered documents, and brought my dog home when he went to the CU for a visit. They're basically small, local banks, so they vary.
posted by theora55 at 10:58 AM on April 22, 2010

I'll join the chorus of complaints about the lack of ATMs.
posted by brundlefly at 11:26 AM on April 22, 2010

Perhaps they have improved, but my experience with them is that they were amateur banks. Less oversight, less professional, less secure, etc. Kind of like banking with a PTA or condo association.

In the Mesozoic age, maybe. They're small, yes. Amateur, hardly. Credit Unions simply don't go in for the bling and veneer of "professionalism" that large banks slather themselves in, that's all. My Credit Union has always been professional and, above all, focused on personal service. And every bit as secure as a bank.
posted by Thorzdad at 11:27 AM on April 22, 2010

I think a lot of the CU complaints here come from those banking with very small CU's. I bank with (and just recently started working for) a credit union that rivals many regional banks in size. We have fantastic internet banking, a very busy business department and mortgage rates amongst the lowest in the area. I worked for banks for years and found that internally, we focused a lot on how to make stockholders happy and make our numbers justify our existence. At my current employer, a locally operated CU which spans 15 counties in one state and 8 in the one next door (pretty big for a CU), I routinely hear people in the loan department talk about how a loan is borderline but that when we are on the fence, we always tip in favor of the member. I NEVER heard anything like this working for a bank. I would suggest that you research every CU in your area and choose carefully based on what is most important to you-tons of ATM's, being part of a network, a great lending department, paying the lowest fees, whatever, and pick the one that matches your needs best. I think you will find that whether you go with a bank or CU, doing the diligence before is something you will not regret.
posted by supercapitalist at 11:28 AM on April 22, 2010 [1 favorite]

I've been in two credit unions, and they're just as bad as banks when it comes to fees. I wanted to close an account at one, but they encouraged me to leave a few bucks in it in case I needed it later. So I did. A year later without warning they started charging me an "account inactivity fee." They could at least have warned me before doing this. I had a similar experience at another credit union.

If I'm going to get ripped off on fees I'll go to a bank. At least it has more locations. (In many more years Bank of America has never charged me a penny for a checking account, though I did get transaction fees on a credit card which caused me to yank all my spending from their cards.)
posted by massysett at 11:31 AM on April 22, 2010

I realize that the lesser amount of ATMs is a reality, I'm just amazed that it is such an issue for people in this day and age, don't you all just whip out your card and make electronic transactions at your merchants anyway? Where and when do you need all that cash that you're taking out of ATMs?

Small CUs are small for a reason, because they are often integral and personal members of the local neighborhood or community. As with any smaller operation, you may experience some lesser quality of service, especially when it comes it IT and Web services. My CUs also have telephone banking services if you need in a pinch if the Web services are in hiccup mode.

I know it's not ideal in many cases, but hey, the whole point of using a CU is to support locally owned, cooperative business structures, and community development. If you're simply concerned that your mortgage rates are not as good, then maybe you're not really interested in a CU.

Oh and by the way, they are in now way "less secure". They are insured by the federal gov't in the same way that banks are for your deposits.
posted by franklen at 12:38 PM on April 22, 2010

Where and when do you need all that cash that you're taking out of ATMs?

Restaurants with a group of people all needing to chip in for the bill. Small, independent shops who charge to be debit on smaller purchases because the merchant fees are so outrageous.

Also, the OP doesn't have a location, and this varies a lot between countries. In Canada, there are 5 big national banks, whereas banks in the US can be as smaller or smaller than credit unions, making the size difference/geographical coverage less meaningful.
posted by Kurichina at 1:00 PM on April 22, 2010

Why not use both?

I have money in the bank that is everywhere coast to coast that also holds my mortgage and a savings and checking at the CU.

The CU's hours are inconvenient (they close at 1:00pm Saturday), but I'd like to think I won't ever need to access that money immediately. I keep emergency funds in coast to coast account that can be accessed anywhere.
posted by readery at 1:12 PM on April 22, 2010

The only thing that has been an active PITA at my credit union (which is fairly large and the size of a small regional bank) is that the neighborhood branches don't carry cash outside of the ATM (The only locations that do are 30-45 min away). So I have to get quarters for laundry at another local CU branch or at the bank. Other than that they're pretty awesome.
posted by calistasm at 1:35 PM on April 22, 2010

My CU is awesome, I've been banking there since I was 13 or so, I'm 27 now. They've gotten together with other local credit unions so I can visit any ATM with no fees. They have hours that are pretty similar to local banks (9-6 M-Tu, 9-7 M-F and 9-2 Sa). They're easier to deal with and give me better rates on car loans and on my credit card there (which also has the largest limit). $5 to open an account and there's no fees.

I like the idea behind a credit union as opposed to a bank.

I have my business checking and credit with them, though I don't use them much (I'm a freelanceer) but hey, minimum balance is $100 for those with no fees. They offer a merchant account, but I went with another for accepting credit cards with an authorize.net gateway because I didn't like their setup. But they've changed since I last enquired to something that I'd probably sign up for if I was looking to repeat the process again.

I fail to see how any properly run CU is less professional in any way than a properly run bank.
posted by Brian Puccio at 1:56 PM on April 22, 2010

I bank with my company CU here in the US. So far, no problems. ATMs is fine, lots of fee free ATMs courtesy of Checkpoint.
Depositing cheques can be a challenge, I have to wait until the visiting branch is open on a Monday in my office, but hell, I'm there most Monday's anyway. Car loans were through them and no issues.
I use mainstream banks in Canada and the UK, but will switch from Citibank in the UK when I go back this summer since they are just messing me around (simply shocking performance, only reason I haven't moved is I'm out of the country).

I think a CU will be fine, so long as you pick the right one.
posted by arcticseal at 1:57 PM on April 22, 2010

The credit union that I used would send me a new ATM card from time to time, and it would have a random PIN. To change that back to my normal pin, I would have to go to their main office, about 30 miles from here.
posted by StickyCarpet at 2:24 PM on April 22, 2010

Zero disadvantages with Kinecta FCU.
posted by SLC Mom at 4:27 PM on April 22, 2010

We've been mostly pleased with our CU, except for a mildly sleazy mailing they sent out, "Please respond immediately to confirm your information! which will sign you up for a service for which we will charge you $7.99 a month"

Also not entirely thrilled with the scarcity of ATMs, even with the COOP network thing. Maybe it's just because all the credit unions seem to be slowly pulling out of downtown Oakland and I keep having to walk farther and farther to get to one — that's making me a bit cranky.
posted by Lexica at 8:09 PM on April 22, 2010

My biggest issues with the CU that does my auto loan are that the online banking system is arcane and setting it up was annoying, and anything I want to change about my account (e.g., my monthly payment amount or schedule) requires me to go to one of their inconveniently-located branches, and I need to take like 600 forms of id with me. The branches are of course open from 9:00-2:00 M-F, and closed on weekends. At larger banks, I would be able to do this all online, or at least through the phone, and branches typically are open much later.

Perhaps they have improved, but my experience with them is that they were amateur banks. Less oversight, less professional, less secure, etc. Kind of like banking with a PTA or condo association.

I would echo this. It doesn't bother me much, but if I was doing business banking, or had more sophisticated requirements, it probably would.

I guess it's a topic for another thread, but for me, big banks and online banks (for high interest savings) easily provide for me banking needs.
posted by !Jim at 9:07 PM on April 22, 2010

The credit card I got through the credit union is bad. It's nice that they issue to people that are new to the country with proof of employment, which is why I have it. However, de-activating my credit card while I was travelling was not cool (it was because the CU's records were compromised). The only notification I had that they were reissuing my card went to my spam email folder, no new card arrived before termination. Of course I could not sort this out because it was the weekend and credit card customer service only operates 9-5 M-F. At the time this was my only credit card. Fortunately my hotel and rental car did manage to get paid for, but it was harrowing. Also, there is no way to schedule a payment for my credit card, even though I have checking, savings, credit card at the same credit union! I switched my credit card to another provider but keep my checking and savings intact.
posted by crazycanuck at 9:23 PM on April 22, 2010

My CU is terrific on service, low & slow on fees, and is part of a generously apportioned network allowing in-branch & ATM convenience beyond measure. I love them and will never let them go.


If, for some reason, you miss payments on a loan or other line of credit extended through the CU, they can freeze your checking and savings accounts, even to the extent of valid checks going through with sufficient funds will be rejected.
posted by batmonkey at 7:32 PM on April 24, 2010

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