When you’ve arrived at the difficult and often personal decision to pull up stakes and leave your bank, a brand new challenge often emerges: you now have to find a new online banking home.
But, you don’t have to stick to a traditional big bank. You also have two other attractive alternatives: credit unions and online banks. They’re both gaining in popularity with more than 100 million people banking at credit unions, and 67 percent of Millennials preferring to park their money with online banks. It’s easy to see why so many are flocking to alternative banking options. Credit unions and mobile banks both tout enhanced customer service, lower fees and other perks that you won’t find at your average big box bank.
So, the question now becomes: which is the better choice: a credit union or an online bank? To help you figure out which one is best for you, we compared them to see how they stack up. Take a look.
Winner: Credit unions
If you like visiting the teller window, the tangibility of filling out a deposit slip and free coffee, a physical credit union is the better choice.
While there are some online-only credit unions, most credit unions operate with a traditional physical presence to conduct your banking business. Some credit unions also have multiple branches, allowing you even more convenience for making deposits and withdrawals on the go.
There is a downside here, however. Those long lines you grew to resent at your old bank may be the very reason you’re broadening your banking horizons. If this sounds like you, a walk-in location — credit union or not — is something you may want to avoid.
Winner: Online banks
Online banks are known for their apps, websites and mobile options. These technology advances are meant to help you bypass the unavailability of a physical branch and to optimize a 100 percent virtual banking effort.
Online banks are on the cutting edge of technology when it comes to banking services, and they typically accommodate a modern, fast, user-friendly — and most of all, safe — banking experience.
Most online banks, including Chime, let you make deposits, conduct peer-to-peer transfers, pay bills, and even check your credit score with just a couple of swipes or taps. And here’s another big perk to mobile banking: an online bank doesn’t close down for holidays like a traditional bank. It’s open 24/7, 365 days a year.
Although you can’t beat technology-driven online banks, credit unions still deserve some credit. They have come a long way in improving and delivering their online banking services. You just may need to be patient when it comes to upping the ante on quality mobile apps and websites. Since credit unions are not-for-profit banking providers, they typically don’t have the same operating budgets as their big bank counterparts, and they aren’t as nimble as online banks either.
Fees and interest rates
Winner: Online banks
Credit unions are on the end of a double-edged sword. Their nonprofit structure and community banking mission allows them to reward their member customers with higher interest rates and lower fees than a global name bank.
On the flipside, online banks may still edge out credit unions when it comes to lower fees. That’s because credit unions with walk-in branches still have overhead expenses. After all, they need to keep the lights on and pay their employees. Online banks, on the other hand, don’t have branches and can therefore afford to not collect fees from patrons.
Overall, you can’t go wrong with either a credit union or online bank if you’re looking to save on fees, and earn more money in interest. Both of these banking options are better bets than a mainstream bank.
Winner: A Tie
Even the most ardent online banking enthusiasts need to hit up the ATM from time to time. And, you better believe that online banks offer ATM options to grab cash on the go. Chime, for one, has over 30,000 ATM locations nationwide (fee free, in fact). Other online banks like Bank of Internet USA and Bank5 Connect also offer ATM networks.
At the same time, federal credit unions like Alliant and Americhoice also support large ATM networks, with 80,000 and 30,000 locations supported nationwide, respectively. To boot, both online banks and credit unions often reimburse ATM fees to customers using out-of-network cash machines.
Winner: A Tie
Customer service is often a number one deal-breaker when it comes to picking a bank.
Yet, when it comes to customer service, both credit unions and online banks are superior to most big banks.
Credit unions offer personalized, customer-friendly access that is often a stark contrast with the impersonal, anonymous service found at most big banks. And, online banks can offer the help you want whenever you need it – even at 3 o’clock in the morning.
When it comes to accounts, credit unions and online-only banks can also both get creative with their services. Credit unions, for example, often feature a myriad of specialty savings programs like Christmas Clubs and rewards programs to help you reach your goals. Online banks also go above and beyond when it comes to customer service. For example, Chime account holders receive daily updates and real-time alerts every time they make a transaction. This type of responsiveness is rarely found at a big bank.
Ultimately, both credit unions and online banks are viable choices when it comes to better banking. But, before you choose which option is best for you, examine your financial situation and ask yourself what you want in a new banking provider. Next: research credit unions and online banks, and determine which one offers the best services and features for your financial needs. Before you know it, you’ll be on the right path to a brighter financial future.