How to Choose a Credit Union

Devan GoldsteinMar 26, 2016

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If you’re drawn to the personalized service, local ties and great rates that credit unions are known for, you may be wondering how to find the right one for you. And because community banks can have some of those same advantages, you might be considering them, too.

Here’s how to think through your decision and find the best place to put your money.

The core  is true regardless of size: Credit unions are not-for-profit, while banks are for-profit organizations.

As a result, credit unions, including , tend to offer better savings rates and loan terms, if you measure trends across financial institutions of all sizes.

Community banks can buck those trends when local competition demands it. And they are much more likely than bigger banks to offer fee-free checking, according to by consumer advocacy group U.S. PIRG.

Bottom line: If you’re going rate hunting, don’t rule out small banks. It’s worth comparing and in your area to see which bank or credit union will give you the best deal.

Historically, one disadvantage of smaller institutions has been the low number of branches and ATMs available to their members or customers.

But both credit unions and community banks have found innovative ways to compete with the huge national banks.

Many belong to fee-free ATM networks like AllPoint and MoneyPass, and some credit unions offer low- or no-fee access to the Co-op Network of shared branches and ATMs. What's more, some institutions offer accounts with fee-free or reimbursed ATM transactions, regardless of who owns the machine.

Bottom line: If you rely on in-person banking, choose an institution that has the strongest branch or ATM presence where you live and that keeps ATM fees low.

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Credit unions have long surpassed commercial banks for customer satisfaction. But as membership grows, their lead is shrinking, at least when compared with smaller banks. In 2015, the American Customer Satisfaction Index showed credit unions just one point (out of 100) ahead of regional and community banks.

It’s also worth noting that in recent years, several online-only banks have earned high marks for their customer-friendly service options and their transparent discussions of fees and rates. Banks like these offer many of , for example.

Bottom line: Individual institutions vary, so get in touch with the ones that interest you most to see what it’s like to talk to them.

Another outdated notion is that small institutions lag on consumer technology, such as smartphone apps and online banking sites.

Third-party software vendors have turned that gap into an opportunity, licensing banks and credit unions to use their prebuilt tools. These institutions’ members benefit from access to modern, easy-to-use digital banking tools.

Of course, different organizations prioritize technology spending differently, so at the smaller end of the spectrum, you may wait a little longer for access to features and services such as , and .

Bottom line: While smaller banks and credit unions have growing options for keeping up-to-date, be clear about your must-have technological features before you shop around.

Some worry that the money they keep at credit unions and smaller banks might not be safe, but the U.S. government insures funds at the great majority of institutions. That insurance works the same way regardless of the size of the bank or credit union:

Bottom line: So long as you stay within federal insurance limits, your money is safe.

Answers to all these issues will vary depending on where you live and how you bank. Deciding which are most important to you will help you find  for your needs, regardless of size.

NerdWallet writer Melissa Lambarena contributed to this article.

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