Consumers have a plethora of borrowing and saving options, from traditional banks to online-only banks to credit unions and investment brokerages.
And while Internet-only banks can offer the most competitive rates for saving and borrowing, credit unions offer a mix of favorable rates and personal service. They're often a good alternative to traditional banks, which still dominate the market.
Credit unions are affiliated groups of people who pool their money and lend it to each other. They don't have divided loyalties--trying to serve a customer at the same time as boosting profits and the stock price for shareholders.
The American Bankers Association's own annual survey, in addition to other polls, consistently finds customers are more satisfied with credit unions than banks.
Credit unions are exempt from paying federal income taxes, which allows them to be competitive, despite being smaller than the megabanks. The banking industry says those advantages allow large credit unions to compete unfairly with traditional banks. But that can be a boon for consumers.
Traditionally, the major catch was qualifying for membership in a credit union. But nowadays, more people than ever are likely to qualify to join at least one credit union--and may be eligible for several.
Though the number of credit unions has been in a long-term decline--mostly due to consolidation, much like the banking industry--the United States is home to about 8,500 credit unions with some 88 million members, according to the National Credit Union Administration.
The main point before joining a credit union is to compare savings and loan rates, fees and product offerings with your bank.
Credit unions have downsides. Although they have made strides in breadth of services, most can't match the variety of services found at large banks and the convenience of robust branch and automated teller machine networks. And you have to search for a credit union you qualify for, as opposed to walking into any bank to open an account.
But there are reasons to consider doing business with a credit union:
-- You probably qualify to join.
A 1998 federal law loosened membership requirements for credit unions--you might qualify just because you live in a certain county or are a member of a particular church. To find out whether you qualify, ask your employer, family members who belong to a credit union or go online to credit union search sites, such as www.joinacu.org and www.ncua.gov/indexdata.html.
Most credit unions require a small savings account deposit to join. It could be as low as $5 for a lifetime membership. That means you retain membership even if you leave the employer, geographic region or association that qualified you to be a member.
-- Array of offerings.
While credit unions of previous generations offered a limited menu of services, such as savings accounts and short-term loans, large credit unions today have broader offerings. And unlike most Internet banks, you can talk face-to-face with someone to discuss your financial needs.
Today, some credit unions share their branches, meaning you can walk into any branch of a networked credit union to conduct business. Credit unions are members of ATM networks, giving you broader access to fast cash.
Many credit unions also give you access to electronic banking and bill-paying.
-- Savings rates.
A six-month certificate of deposit recently paid 4.74 percent at credit unions, on average, but 4.12 percent at traditional banks, according to market research firm Datatrac Corp., although rates of course vary by location and institution.
Rates also can be higher at credit unions for checking and savings accounts, as well as money market accounts.
And credit union accounts can have lower minimum required balances and fewer fees.
If the credit union does well, you might even get a dividend because you are a shareholder. Online-only banks, such as EmigrantDirect.com and HSBCDirect.com, tend to offer higher rates for savings, recently at 5.05 percent. But personal service with online-only banks is an issue.
-- Savings are insured.
The vast majority of credit union deposits are insured up to $100,000, like bank accounts. Instead of protection from the Federal Deposit Insurance Corp., credit union deposits are protected by the federal National Credit Union Administration. If you'll be saving money at a credit union, be sure its deposits are insured.
-- Loan rates.
Borrowing money for anything but a home mortgage can lead to money problems, but if you're going to borrow money, especially for a car or home, you'll want to pay the lowest rates.
New car loans for 48 months averaged 6.22 percent interest at credit unions recently, while traditional banks charged an average of 7.58 percent, according to Datatrac. Credit union credit cards charged an average of 12.16 percent interest, while traditional banks charged 15.08. Credit unions also offer rewards cards--which offer cash back, airline miles and merchandise points--though offerings vary by card and credit union.
Rates for adjustable-rate mortgages and home-equity loans also were lower on average at credit unions, although fixed-rate mortgages were about the same as traditional banks.
The averages, however, don't necessarily reflect how competitive savings and loan rates are in a particular market. And you might qualify for more favorable bank rates if you have multiple accounts at a bank, said John Hall, spokesman for the American Bankers Association.
Gregory Karp is a personal finance writer for The Morning Call, a Tribune Co. newspaper in Allentown, Pa. E-mail him at firstname.lastname@example.org.