If you’re considering switching from a Credit Union to a Big Bank, or vice-versa, here are some things you may wish to consider. In this article, I share why we decided to switch from a credit union to a big bank.
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For years, I’ve been a big advocate of credit unions. They are local, member-owned, and typically invest in their communities.
How credit unions work, is you buy a share in the credit union, which gets you a vote in any credit union decisions. You then become an ‘owner’ of the credit union.
Credit unions are non-profit organizations whose primary purpose is to serve their members.
In Canada, credit unions are provincially regulated, where banks are federally regulated.
Credit unions typically have lower fees than big banks, and superior customer service. I loved that when I called my credit union, a real human from my actual branch answered the phone.
I was with my credit union for approximately 10 years. I was initially excited to make the switch to a credit union, due to all the reasons I listed above.
I loved the idea of my money staying in the community.
That my credit union was not beholden to share holders, but rather to its members (who are owners).
I loved the personalized service I received from my credit union. When I was first thinking about opening an account with the credit union, I had some questions, so I sent an email. The CEO himself responded to my email, and patiently answered all the questions I had. I was sold, based on that fact alone!
If credit unions are so awesome, why would I even consider going back to a Big Bank?
Smaller Credit Unions are Not Viable
The credit union I joined was a standalone credit union. Meaning it only had one branch. This definitely enhanced the ‘small banking’ feel. The tellers all knew me by name. It was great, and I loved it!
Soon after, I received news that our standalone credit union was merging with a regional credit union (which had 2 other branches). No biggie! Now it was a 3-branch family. Still great, as I had 2 other branches I could go to if I was passing through those small, neighbouring towns.
A few years later, our credit union merged again! This time, with a province-wide credit union. At first, I was excited, as I thought it might mean that we would get access to some enhanced features that were not possible with the smaller credit union – such as a more modern online banking app, or a Visa Debit card, so I could use my debit card to make purchases online, rather than having to rely on a credit card.
It turned out neither of those things happened. The banking app was worse than the old one (if that was possible). And Visa Debit was not happening (I asked).
I think the truth of the matter is that small credit unions are simply not viable. They need to be part of a larger network in order to survive.
No Visa/MasterCard Debit
One thing that was really lacking with our credit union, was a lack of Visa or MasterCard Debit card.
If you’re not sure what this is, it’s a debit card that has a Visa or MasterCard logo on it. This enables you to use your debit card anywhere that you’d be able to use a credit card.
It works similar to a credit card, except the funds come directly out of your bank account.
Let’s face it, in today’s digital age, a lot of purchasing happens online. And a traditional debit card (without a Visa or MasterCard logo) can’t be used online.
Our family prefers to use cash whenever possible, but obviously you can’t use cash for online purchases.
Since our credit union did not have a Visa or MasterCard debit card, we had to use a credit card for online purchases.
I despise debt, so even though we paid off our credit card balance monthly (or sometimes even weekly, as I couldn’t stand seeing a balance owed), it still always felt like we were carrying a small amount of debt.
I kept holding out hope that our credit union would eventually get with the times and bring in a Visa or MasterCard debit card, but even with the merger with the province-wide credit union, they informed me that this would not be happening.
I always read online that credit unions typically have lower monthly fees than traditional big banks. I’m not sure if this is only a US thing (we live in Canada), but our monthly fees were just as high as the big banks.
But the biggest thing that bothered me, is that the credit union did not waive monthly fees for maintaining a minimum balance in our account. No matter how much money sat in our chequing account, we still had to pay that monthly fee ($15/month).
Whereas almost all the Big 5 Canadian banks had the option to waive your monthly account fees for maintaining a minimum balance in your chequing account.
Lack of ATM Access
When we moved to our new homestead, it was in a small town outside the city where I initially opened my credit union account. Initially that was fine, as the local convenience store had an ATM that was connected to the same network as our credit union. This meant that I could withdrawl cash without incurring ATM fees.
Since our family primarily uses cash, this was a big deal. However, that convenience store closed, taking the ATM with it. The nearest credit union bank machine was in another town, 20 minutes away (or 30 minutes to the city where I originally opened my account).
I tolerated this for about 3 years – always making sure that when we made a trip to town, that I stopped at the credit union to withdrawl cash. However, there were times when we needed more cash than what we had on hand, which meant using the ATM at the local Big Bank branch – incurring fees from not only the bank, but from our credit union as well (to the tune of about $8 total, for the simple privilege of withdrawing cash!).
Poor Online Banking App
When my credit union made its most recent merger, the online banking app was somehow worse than the previous 2 apps. I figured with being a larger credit union, it would have more advanced technology, but I was wrong!
The app was clunky and old fashioned, and not intuitive to use. You had to click multiple times just to get to the transactions screen. And even then, you could only see 2-3 transactions at a time on one screen. It was a bit ridiculous.
I login to online banking daily to keep an eye on our accounts, so having a clunky app made this process painful.
As great as the service was initially, it seemed that every time the credit union merged, the service got poorer.
I used to be able to call and talk to a real human. Now when I call, the phone just rings and rings, and then an answering machine picks up and asks you to leave a message for a call back. Any time I leave a message, I don’t get a call back. And no matter how many times I call, no one answers the phone. Since the branch is 30 minutes away, visiting in person is inconvenient.
Local Big Bank Branch
As I mentioned earlier, the small town we moved to has a local branch for a Big Bank. It’s the only bank in town! And for years, I ignored it, because it was a Big Bank (other than when I needed to make an emergency cash withdrawl).
I was so hard-core in my belief of credit unions, that I disregarded the many advantages that Big Banks can offer.
The local bank had been serving this community since 1908! That’s more than 100 years that the bank has been in this town. Unlike my credit union, which kept being swallowed up by larger fish, this big bank branch was rock solid. (It also happens to be a branch of the oldest bank in Canada, so the original bank goes back even further, to the early 1800s).
Small Bank Feel
Although technically one of the ‘Big 5 Banks’, the local branch has a very small-banking feel. That’s because we are a village with a small population, so the branch itself is small. There are just a handful of tellers, and they already know me by name!
Local Branch Access
By far, the biggest draw to switch from a credit union to a Big Bank, is because I now have local branch access. Instead of driving 20-30 minutes to get to the credit union, I now drive 3-4 minutes to get to the bank.
If you aren’t one to visit a bank in person, this may not be a factor for you – but it definitely was for me. I love having the option to walk into a branch and ask for help with something, versus trying to figure it out online, or phoning a call centre.
We also now had close, easy access for cash withdrawls.
Most excitingly, this bank had a Debit MasterCard! This meant that I could finally ditch the credit card, and use a debit card instead. (As followers of Dave Ramsey, this is a big deal!).
Like I said, although we never carried a balance, nor paid a penny of interest or annual fees, I still despised the feeling of being perpetually in debt.
I also believe it’s true that when you spend using a credit card, even if you don’t carry a balance, you have a tendency to spend more. Since you are technically spending someone else’s money (even if you intend to pay it back), it creates the psychological effect of not feeling the pain of spending right away. Thus, you tend to spend more.
Your bank account balance doesn’t decline, and cash isn’t physically leaving your possession, so spending on a credit card doesn’t ‘hurt’ the same way spending cash or debit does.
Not to mention that with a credit card, you have the option to spend more money than you have. This isn’t possible with a debit card, so using a debit card prevents you from going into debt.
Also, spending on a credit card always made me feel like I was making the purchase twice! First when I bought the item, then when I paid the credit card bill.
It was an extra, completely unnecessary step. An extra task hanging over my head – I had made the purchase, but still hadn’t paid for the item.
Since I value simplicity, I love knowing that once an item is paid for, it’s done. I don’t have to think about it again. And I don’t have that looming feeling of having to remember to pay the credit card.
Waived Account Fees
I’ve always hated the idea of paying banking fees. Since banks obviously make money from us in multiple ways (through merchant fees, and being able to loan out our cash to others and charge interest, etc), I always thought that paying bank fees was ridiculous.
However, the credit union had no option for waiving bank fees.
With our new bank, as long as we maintain a minimum balance, we will never have to pay a bank fee again!
Free Business Banking
However, the big bank offered a FREE business banking account, saving me $15/month in banking fees.
Better Interest Rates
The Big Bank pays MUCH higher interest rates on savings account than our credit union did. In fact, we closed our credit union savings accounts years ago, as they were paying 0% interest. So a savings account was completely pointless, we just kept everything in our chequing account.
Now, we are actually earning interest on savings, so our money is not getting eaten away by inflation at least.
Family Banking Plan
Unlike the credit union, who treats each chequing account as a completely separate entity, with its own banking fees – the big bank has a Family Banking package. This means we can open as many accounts as we wish, and anyone who lives at the same address can be under that package. You only pay a fee on the main account (which is waived when you maintain a minimum balance).
This means our kids can have accounts as part of our package, and as long as they live at home, they won’t pay any fees.
Better Online Banking App
Now obviously, a big bank will have a much larger budget for things like banking apps than a small credit union would. But since most of us use online banking, this is kind of a big deal.
The Big Bank has a MUCH better banking app than the credit union did. It has several features that I didn’t even realize I was missing, until I had them.
I love that the app alerts me every time there is a transaction on our account. I can then enter transactions into our budgeting app right away, and we always know exactly how much is left in our budgeted categories.
Seamless Integration with our Budgeting App
Our family uses YNAB for budgeting. This is an app that mimics the envelope method of budgeting, except it’s digital.
In the old days, people used to budget by cashing their paycheques, and divvying up their money into various envelopes. Perhaps one for rent or mortgage, one for groceries, one for gas, and so on. This puts a hard cap on your spending, as once the envelope is empty, you can’t spend any more (unless you move money from another envelope).
YNAB uses this same principle, except it’s digital. Meaning that regardless of whether you pay with cash, your debit card, or even your credit card, the money gets deducted from the ‘envelope’, and you can see how much you have left to spend.
Basically, at the start of each month (or with each paycheque, if you’d prefer), you assign all of your dollars to categories, or virtual envelopes. Then, as you spend, the money gets deducted from those categories.
This app is what allows us to budget, plan for future expenses, and live debt-free.
It connects with online banking apps, so any digital transactions you make will automatically download to YNAB. Then you just go in and assign them to a category.
YNAB connects seamlessly with the online banking app. With the credit union, since it’s smaller, I was always having issues with connectivity and having to re-enter my credentials. Now, everything works beautifully and almost instantaneously.
I would definitely not recommend switching banks for this, as it’s a LOT of work to make the switch. But most big banks offer some kind of a sign-up bonus. Our new bank was offering a $350 incentive to open a new account. (There were also some stipulations, such as setting up a direct deposit, making 2 bill payments from the account, etc). I was planning to do those things anyway, so the bonus was… a bonus!
Although I wouldn’t have switched banks for this reason alone, it certainly compensated me for the time and effort it takes to make the switch.
Credit Unions vs. Big Banks
This article was not really intended to be about ‘credit unions vs. big banks’, but more about choosing the option that makes the most sense for your family.
As much as I loved the idea of being part of a credit union, the reality was just not practical for our family.
Being a credit union member was costing us time, money, and convenience.
Moving to a big bank that happened to have a branch in our town made the most sense.
Although switching everything over was a TON of work, it was well worth it for the reasons stated above.
If you’re currently trying to decide between a bank and a credit union, I encourage you to examine the following:
- How close is the nearest branch to your home or work?
- What are the fees, and is there a way to waive them?
- How robust is the online banking app?
- What are the interest rates like?
- Do they have a Visa or MasterCard debit card?
- How is the customer service? (Visit the branch to find out!)
- Do they have integrated investment products, so you can keep all your finances in one place?
- If you use a budgeting app, does your bank integrate with the app?
- Are there incentives for switching to make it worth your time?