A Better Way of Banking?

Published Online: September 4, 2008 - 12:00:00 AM (CDT)

A Better Way of Banking? By Michael Sheehan If your local community bank disappeared among the spate of mergers and takeovers in recent years, chances are that the bank you use is one of those that pays its CEO a mega-dollar salary to put it into a position where it has to write off billions in bad loans. If you’re not impressed with that track record, it may be time to look at an alternative: your local credit union. Credit unions enjoy several advantages that allow them to offer better deals to their customers. As non-profits, they pay no taxes, and as cooperatives, they don’t have to make a profit for the benefit of their shareholders. And now, with many traditional banks on the financial ropes, credit unions can also make the claim that they’re not selling off assets to pay for subprime loans gone sour. As a result, say credit unions, they can offer lower interest rates to borrowers and higher rates to savers. Credit union customers also enjoy the same safety as those who use traditional banks. All but 2% of the nation’s 8,500 credit unions are members of the National Credit Union Administration, which operates in the same way that the Federal Deposit Insurance Corporation does for banks, insuring deposits for up to $100,000. There are some downsides. Credit unions may not offer the full range of services that your current bank does, and it most likely has fewer branch offices. It may also restrict its membership to certain groups, like employees of a company, members of certain organizations, or people who live in a certain town or neighborhood. To find a credit union near you that you are eligible to join, go to www.creditunion.coop.