Credit Unions Take on Big Banks

Interest rates

With lower overhead and no profit incentive, credit unions generally offer more competitive rates. The average rates for certificates of deposits (CDs) offered by credit unions were about 30 basis points higher than those of banks (a basis point is one-hundredth of a percentage point), based on June 2008 data from the NCUA. At the end of a four-year CD, the 3.61% rate offered by a credit union would earn you $1,524 on a $10,000 investment. The banks' rate of 3.31% would give you $1,391.

Fewer services

Although credit unions are increasing the number of member services, you'll likely have fewer options than at a big bank. Similarly, your local credit union may have fewer ATMs or branches. If you use ATMs while you travel, think about choosing a credit union that belongs to the Coop network to avoid surcharges.

Competitive advantages

Not all credit unions are created equal. Some bigger ones resemble banks, with higher fees and less competitive rates. You may also want to split your banking to benefit from better rates at a credit union and a wider array of services at a bank.