If you’ve grown weary of racking up account fees, receiving lackluster service, and/or wondering about the stability of your money, you might be seeking a new banking solution. If that case, it’s important not to overlook credit unions. These not-for-profit institutions often provide better returns on deposit accounts, lower interest rates on loans, personalized service, and rank high on the safety/security scale. Furthermore, they have become increasingly popular by bank customers who are eager to find a more suitable option for their hard-earned money.
Benefits of Switching to a Credit Union
- Member-focused approach.
- Lower fees.
- Lower interest rates on loan accounts.
- Higher interest rates on deposit accounts.
- Community involvement.
- Backed by the National Credit Union Administration (NCUA) for protection of your deposits (in the unlikely event that the credit union experiences financial difficulties).
- Increased access to membership (led by an increase in credit union popularity).
- Higher overall happiness and satisfaction levels among members.
Summarily, a credit union is a member-owned financial institution that offers a range of products and services comparable to traditional banks. This includes checking and savings accounts, credit cards, loans, insurance services, and online banking, among a variety of others.
The key distinction lies in their primary focus on serving the needs of their members — rather than maximizing profits. This translates into a more personalized approach, overall better service, and a genuine willingness to work with their members to meet their financial needs.
Furthermore, credit unions typically have strong ties to the communities they serve. This means they often partake in and/or host local events, support community initiatives, and provide financial education programs to the community. As a member, you become part of that greater collective effort to make a difference in your community.
If you’re thinking of joining those who have made the switch, we’re sharing six simple steps to make the transition to a credit union:
- Do your research.
- Decide on which account(s) you want to open.
- Take inventory of your current incoming and outgoing transactions.
- Set up transactions to and from your new account(s).
- Transfer the balance from your current account to your new account.
- Close your old account(s).
Let’s take a closer look at some essential details for each of these important steps.
1. Do Your Research
When researching credit unions, it’s essential to focus on two key aspects: financial stability and member satisfaction. First, investigate the credit union’s financial health by examining their financial statements, annual reports, and credit ratings. Look for indicators such as consistent profitability, strong capital reserves, and low default rates. A stable credit union is more likely to offer reliable services and withstand economic downturns effectively. Additionally, consider the credit union’s membership eligibility criteria, as this may impact its ability to serve your specific needs.
Secondly, delve into member satisfaction to gain insights into the credit union’s customer service and overall member experience. Seek out online reviews, testimonials, and social media discussions to gather feedback from current and past members. Pay attention to comments regarding ease of transactions, responsiveness of staff, and the availability of convenient digital banking services. Additionally, explore any awards or recognition the credit union has received for customer service excellence. A credit union that prioritizes member satisfaction is likely to provide a positive banking experience and meet your financial needs effectively.
Once you gathered your data regarding the abovementioned criteria, you should be able to narrow it down to the one credit union that best meets your overall financial goals.
2. Decide on Which Account(s) You Want to Open
After you decided on a particular credit union, it’s time to take inventory of your account needs. For instance, you might focus on a higher interest rate certificate to maximize your savings or a discounted loan rate for a specific financial need, both of which may not be readily available at traditional banks or institutions at the same competitive rates.
Keep in mind that most credit unions offer a wide range of accounts and services that are comparable to traditional banks, so you likely won’t have any issues landing one that fully meets your banking needs.
You should also assess if there are any specific requirements associated with the accounts that you are interested in. Any such requirements must be feasible for you and align with your needs and goals.
Once you’ve decided on an account, start gathering the information needed to complete an account opening application. In addition to your basic personal information, like your address and date of birth, you’ll typically need a government-issued ID (i.e., driver’s license, state ID, passport) with your current address and your Social Security number.
3. Take Inventory of Your Current Transactions
If one of your goals is to open a transactional account (e.g. a checking account) that you intend to use for your day-to-day spending — be sure not to skip this step.
Take some time to review your past statements, paying close attention to any recurring deposits and expenses, automatic payments, transfers, etc. These are all transactions that will likely need to be updated to your new account.
Here are some typical recurring deposits and expenses that may be on your list:
- Social Security or retirement benefits
- Regular transfers from another account
- Rent or mortgage payments
- Utility bills (electricity, water, gas)
- Subscription services (Netflix, gym membership)
- Insurance premiums (car insurance, life insurance, homeowner’s insurance)
- Loan payments (student loan, car loan)
- Credit card payments
4. Set up Transactions to and from Your New Account(s)
While this step may seem like a no-brainer, the consequences of not completing it warrant a reminder. Once your new account is up and running, you need to redirect those transactions that you took inventory of to your new account. Failing to do so can result in various consequences, such as:
- Delayed deposits
- Missed payments
- Late fees and penalties
- Disruption in services
5. Transfer Balances to Your New Account(s)
Statistics from the National Association of Unclaimed Property Administrators show that approximately one in seven people have unclaimed cash or property, collectively worth billions. Alarming, right?
Many of those unclaimed assets are held up in some of the accounts we’ve discussed, among others, including:
- Checking or savings accounts
- Life insurance proceeds
While a portion of these assets remains unclaimed due to a lack of knowledge on the owner’s part, it’s also common for people to forget about certain assets (like during the switchover between financial institutions).
It’s easy to assume it won’t happen to you, but the reality is that it happens more frequently than people may realize. So, it’s essential to take proactive measures to prevent it from sitting idle, whether in an abandoned account or the hands of the state government as an unclaimed asset.
6. Close Your Old Account(s)
At a minimum, the crucial steps to complete before proceeding with an account closure include the following:
- Redirecting all intended transactions to your new account
- Transferring over any balances
- Ensuring all pending transactions are cleared
Once you are ready to close your account, there are a final few things to keep in mind leading up to and following the closure of your account:
- Monitor incoming transactions regularly leading up to the account closure
- Check for any account closure fees
- Obtain confirmation of account closure for your records
Leaving your account at a zero balance without taking any further action to close it may not seem like a big deal, but it can be. Once you close your account, you can reduce the risk of identity theft or fraud, and even simplify your finances as a whole.
Partner with Lafayette Federal for Your Banking Needs
Since 1935, Lafayette Federal has sought to provide members with a safe and convenient place to save, and to offer deposit and loan accounts at rates and terms more favorable than those of other financial institutions. With assets over $1.74 billion and over 56,000 members worldwide, Lafayette Federal operates eight full-service branch offices in the District of Columbia, Maryland, and Virginia and offers global access via the shared branch/ATM network and 24/7 electronic services.
Lafayette Federal has received numerous local and national accolades, including ranking in J.D. Power’s U.S. Consumer Lending Satisfaction Study (2022), being recognized by the S&P Global Market Intelligence Report as one of the top 100 credit unions nationwide (2020-2022), by Newsweek as one of America’s Best Banks (2022-2023), received a 5-star ranking from Bauer Financial (2022), and honored by the Washington Business Journal as the 8th fastest-growing company in the DMV region (2022) .