High school student: Banks or credit unions?

Quote from Jeffbx : ...and the government stepped in to regulate the banks because they are gouging thier customers. Why do you think only big banks are doing it & not the credit unions? They both have the same revenue stream, but I don't see any credit unions talking about $5 ATM fees, minimum transactions per month or $15k minimum deposits for 'free' checking. The big banks are doing nothing more than passing on their losses to the customers, and CUs do not have those losses to deal with.

Credit Unions and Banks are under an entirely different levels of regulation. You can't compare the costs the Gov't is requiring of banks as compared to credit unions.

Wow, the ignorance here is incredible....

First off, OP needs to understand the difference between a bank and a credit union. If your Econ teacher didn't point this out, he is a miserable failure. A bank is a private for-profit entity whereas a credit union is a not for profit organization owned by members of a common interest group(s).

For example, all employees at a given company could have a credit union, all students and faculty of a given college, if you (live, work, attend school, worship, occasionally bone somebody) in a geographic area.

So, to all you idiots who rushed to pimp for credit unions, maybe you should also mention to OP that he might not be able to walk into a given credit union and open an account. (That being said, with Google and 15 minutes, he could find one). But, being part of the special interest group tends to be where you get better service at a credit union, because by doing your banking there, you basically are the boss (in the same way somebody who owns a share of Exxon stock is the boss of a gas station...which is to say, you're not), whereas a bank, your only real power is to close your account.

Back to OP though, what do you need a bank account for? To show off your cool debit card to friends? Keep money from your job safe? Get in the habit of saving money? Cash checks? Without knowing a little more about this, it's hard to give recommendations of exact banks or exact credit unions. That being said, here's what you should look for: A student account with no fees and no minimum balance until you graduate college. Preferably a physical presence near whatever you will be doing after high school (if you do your banking at a 3 branch credit union, you might want to switch when you go to college somewhere else). One big benefit of credit unions could be that many credit unions offer college scholarships to their members only, whereas I've never heard of a bank doing the same thing.

When it comes down to it, OP, you will probably have the exact same experience at a big bank or a credit union, should you set up your account properly.

Quote from TomJames : Credit Unions and Banks are under an entirely different levels of regulation. You can't compare the costs the Gov't is requiring of banks as compared to credit unions.

My only point is that you will pay higher rates & have more unreasonable fees forced upon you by big banks than by CUs. It's totally debatable about WHY those fees are there, but the bottom line is that bank customers get gouged with those fees.

Quote from mwa423 : Wow, the ignorance here is incredible.... ... When it comes down to it, OP, you will probably have the exact same experience at a big bank or a credit union, should you set up your account properly.

No offense, but you just stormed in here, called everyone stupid & then didn't even answer the question. Please save the condescending attitude.

OP's question was:

Quote : but I want to know what are the pros and cons for saving, as well as spending, with bank accounts and credit unions.

Here you go:

Big Banks - Pros: Lots of branches
Cons: ridiculous fees, poor customer service, more likely to have a bad experience, more likely to have unexpected fees

CUs - Pros: member owned, good customer service, no silly/hidden fees, student friendly, lower interest rates on loans, higher interest rate on savings
Cons: not as many branches as big banks


They both offer the same services (checking, savings, loans, debit/credit cards) - you'll just have a much better experience at a CU, IMHO.

higher interest rate for savings? Define "higher" because it seems like you are blowing things out of proportions. Going with a credit union you are only going to get a .5% difference in interest rates unless you have one of those special promotion accounts in which you get a 5-7% interest account. However they either only last for a certain promotional period OR they have a number of stipulations that often counteract the interest gained (ie use debit card x amount of times; only available for X amount of dollars through XX amount of dollars, if greater than XX or below X then standard interest applies..)

Just bank with a big bank until you graduate college or start getting charged fees. Customer Service is often subjective since some people report bad CS experience when in fact those same people are in DEFAULT. Obviously people in default are going to receive a lackluster CS experience because they owe them money. ALL BANKS (CU or not) will do this to you.

Former Credit Union employee here:

I got this question all the time.

This is how I answered-

1. Do you qualify for any free checking/savings accounts at a bank?
1a. If yes, pick a bank.
1b. If no, pick a CU.

2. Do you have a credit union nearby?
2a. If yes, does it participate in a Co-op network (allows you to do your banking with a host CU)?
2b. If no, pick a bank, if free.

3. Is there any way you could avoid the fees that a bank might levy?
3a. If yes, and if it's reasonable that you could consistently avoid them, pick a bank.
3b. If no, pick a CU.

One thing that I learned from my time at a CU is that while it might be a tad bit easier to get services and products at a CU if you're an established customer, your limits will be lower. I worked for one the largest CUs out there, and we considered 5,000 one of our higher credit limits on our "Platinum Visa card." $5,000 is the lowest credit limit I have with a bank (my first WaMu card!). I don't even have the income as a student to justify my available credit.

Ideally, you'll want to keep both accounts open. Why? Because you never know when you might the services that the other provides. When I need a cashier's check, I'll go to the CU since it's free. When I want to deposit a large check and not have it subject to an extended hold, I'll go to a bank.

It's a matter of convenience, and that includes fees. If you feel that you're able to handle your money, and that you won't be charged for it, I don't really see a reason why banks should scare you.

That being said, your college should have banks and CUs grovelling to get your business. They all offer college accounts that you can use for no charge (some might require a minimum times you'd have to use their debit card, however).

I can say more, but I need to order food.

And by order food, I mean play video games.

Quote from rebelx : Former Credit Union employee here: I got this question all the time. This is how I answered- 1. Do you qualify for any free checking/savings accounts at a bank? 1a. If yes, pick a bank. 1b. If no, pick a CU. 2. Do you have a credit union nearby? 2a. If yes, does it participate in a Co-op network (allows you to do your banking with a host CU)? 2b. If no, pick a bank, if free. 3. Is there any way you could avoid the fees that a bank might levy? 3a. If yes, and if it's reasonable that you could consistently avoid them, pick a bank. 3b. If no, pick a CU. One thing that I learned from my time at a CU is that while it might be a tad bit easier to get services and products at a CU if you're an established customer, your limits will be lower. I worked for one the largest CUs out there, and we considered 5,000 one of our higher credit limits on our "Platinum Visa card." $5,000 is the lowest credit limit I have with a bank (my first WaMu card!). I don't even have the income as a student to justify my available credit. Ideally, you'll want to keep both accounts open. Why? Because you never know when you might the services that the other provides. When I need a cashier's check, I'll go to the CU since it's free. When I want to deposit a large check and not have it subject to an extended hold, I'll go to a bank. It's a matter of convenience, and that includes fees. If you feel that you're able to handle your money, and that you won't be charged for it, I don't really see a reason why banks should scare you. That being said, your college should have banks and CUs grovelling to get your business. They all offer college accounts that you can use for no charge (some might require a minimum times you'd have to use their debit card, however). I can say more, but I need to order food. And by order food, I mean play video games.

As having been in the CU yourself, or for anyone really, can anyone help explain the decision for a big bank? I mean, take for instance, BOA. I happen to be with them because they were the only bank that my parents could get started with when they moved to the states (business reasons). I'm trying to look to the future, but I see this abysmal .08% interest rate unless the max goal is reached, then it's .1%. I look over at the most popular CU down in the south (GA) and look at Delta Community. BOA requires at least 2500 for that .08. DCU has no requirement for a simple savings account and we're looking at .3%. Change, i'm sure, but it's still 3* greater than what I'm currently getting. Then I look into DCU's money market, with a measly 1k requirement and it's starting at .35%, and once the goal is reached it's up to .4%.

The idea that i would take out of just getting out of college is to have your rainy day fund completely accessible at any time, which has come up on me at least twice now (where a huge payment was needed and would be paid back in the very near future, but access to over half of what's saved). Say, a safety threshold of 10,000. This would need to be accessible, untaxed, immediately at any point. So a Bank/CU is probably the best way to go (I could be wrong, but I'm interested to know if so). But, from what I can see, you dont want this money to be accessible in the means of a debit card, you just want to know that when push comes to shove, you can draw. As such, the only positive i can see is through a CU. It'll earn you the most interest on idle money that is accessible at any time.

Is .. that right? maybe I'm missing a super bank that has awesome $$$ or maybe there's an even better CU out there, i just picked the most common one.

What about an OSA (Online Savings Account) say, through HSBC. They seem to be showing a .8% APY with no limits or requirements, just that it's online only (which i can deal with). I'm sure there's gotta be a catch, maybe some kind of transfer fee or limit that prevents any mass-pulling but.. any advice on those?

Personally, I have my savings acct. with a credit union and checking with USAA. I never visit a branch. USAA can instantly take or send money from my CU savings. I can scan checks into my USAA acct. from home or phone.

I recommend such an option (if not USAA, a big bank, I suppose. Look at CCs you may be interested down the road and get an acct. with the bank that offers them - often you get extra points if you hold a bank acct. with your CC's bank - Citi's Forward card for instance does this - it is a great card you ought to look into when the time comes). Be smart with your money and understand how to avoid all fees. My CU has a $5 fee if the acct. is below 100 at the statement date (b/c it is savings) but I have never paid such a fee.

Quote from barnz008 : Why lend to the TBTF when there are far better options? Like Brian said, you're better off with ziploc bags of cash in your freezer than loaning it to the zombies.

u made it sound like FDIC don't do shit? If it's truly TBTF then why would it be better off putting it in freezer?

Quote from Jeffbx : ...and the government stepped in to regulate the banks because they are gouging thier customers. Why do you think only big banks are doing it & not the credit unions? They both have the same revenue stream, but I don't see any credit unions talking about $5 ATM fees, minimum transactions per month or $15k minimum deposits for 'free' checking. The big banks are doing nothing more than passing on their losses to the customers, and CUs do not have those losses to deal with.

1. because CU don't have over certain amount of deposit (i think it's over 5 billion or something) so they are under different regulation.
How do you know they have the same revenue stream? How about the cost? Something simple to chew on.... http://www.americanbanker.com/bul...018-1.html
2. It's not ATM fee it's debit card fee and it's $1,500 not 15k for Wells, Chase, and BoA as far as i know.

I have no idea why you are trying to bashing the corporate banks while you have all the wrong information to begin with.

Quote from kyotuosa : u made it sound like FDIC don't do shit? If it's truly TBTF then why would it be better off putting it in freezer?

The giant, mega banks were deemed too big to fail - that's why a few years ago they received billions and billions and billions of taxpayer dollars (your and my money) to bail out their failing institutions.

They engage in atrocious business practices, don't care about their customers, act as if they're above the law (and, in some ways, they were right - see mega bank bailout mentioned above) and they should have been allowed to fail or at the very least busted up into much smaller entities.

Quote from kyotuosa : u made it sound like FDIC don't do shit? If it's truly TBTF then why would it be better off putting it in freezer?

Have you ever read the FDIC disclaimer on the placard at the bank? Go ahead and do that next time. Read the whole thing. Then realize they have maybe enough to backstop $1 trillion in a system that's held up by nothing other than fraudulent, counterparty-dependent, highly-levered debt kindling waiting for that one big match to set it ablaze. None one can say when, but it's 100% guaranteed to happen.

Quote from Brian1 : The giant, mega banks were deemed too big to fail - that's why a few years ago they received billions and billions and billions of taxpayer dollars (your and my money) to bail out their failing institutions. They engage in atrocious business practices, don't care about their customers, act as if they're above the law (and, in some ways, they were right - see mega bank bailout mentioned above) and they should have been allowed to fail or at the very least busted up into much smaller entities.

right right, it's called TARP and due to mortgage CDS but you still haven't explain why it would be better than putting money into ur freezer.

Also, correct me if I am wrong, JP Morgan and Wells took the TARP but actually don't need them and also repaid them. As I have no doubt that all the mega banks will repay the TARPS.

I'd rather see financial system recover from the collapse of mortgage bond market than a system that's doom to total chaos. But this part is my opinion and you are entitle to your own opinion. In this thread, we are actually talking about the benefit of using mega banks or credit union. So, I am not even sure why bail out fund would come up in the topic and sure wouldnt' think putting money in freezer or dig a hole in back yard is better than putting money in any bank.

Quote from barnz008 : Have you ever read the FDIC disclaimer on the placard at the bank? Go ahead and do that next time. Read the whole thing. Then realize they have maybe enough to backstop $1 trillion in a system that's held up by nothing other than fraudulent, counterparty-dependent, highly-levered debt kindling waiting for that one big match to set it ablaze. None one can say when, but it's 100% guaranteed to happen.

Right right.....so if that, the collapse of FDIC, actually happens what do you think the money in ur freezer will worth? Maybe you should put change all cash into Gold then maybe that'll actually mean something.

Quote from kyotuosa : Right right.....so if that, the collapse of FDIC, actually happens what do you think the money in ur freezer will worth? Maybe you should put change all cash into Gold then maybe that'll actually mean something.

I sure hope you're listening to what you're saying...cause you're actually beginning to make sense.

Despite the fact that paper dollars will be worth less and eventually worthless, it's the fact that you have them in your possession, when you need them, to get what you need quickly and effectively is all that matters. When banks go on "holiday," they close. And the only reason a bank would close in such a manner would be to "revaluate" it's "assets" [read; your loans to them in the form of deposit]. Sure, it'll still be guaranteed...guaranteed horseshit.

Just join a damn CU already and take matters into your own hands/neighborhood.