Everything You Need to Know About Switching to a Credit Union

While covering Occupy Boston in 2011, I was intrigued by a movement-within-the-movement focused on moving your money: Bank Transfer Day. Channeling Occupy’s spirit of resistance, it was established by activists and community organizers as a national day of action to encourage people to close their accounts at big banks and switch to local credit unions.

credit union
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Credit unions are community-focused, federally insured, nonprofit, and member-owned banks. They exist to provide financial services for specific groups, like the employees of a union or people who work or live in a certain neighborhood. Like banks, credit unions offer financial services: debit cards, checking accounts, savings accounts, loans, and mobile banking options. But unlike banks, credit unions do not have outside investors and are not motivated by profit.

All credit unions are considered cooperatives, because all the account holders are members — or shareholders — and decisions are made democratically, says Rebecca Pear, the director of member services at Brooklyn Cooperative Federal Credit Union. Membership often allows individuals to vote on the credit union's board of directors, she says.

All the profits that credit unions make go back into the business in the form of dividend payments to members, higher interest rates on savings, and lower interest rates on loans, says Michael Mattone, assistant vice president of public relations and corporate communications at Municipal Credit Union.

Ever since that time covering Occupy, the thought of switching to a credit union has been spinning in the back of my mind. The whole process has always seemed burdensome, but after doing some research, I learned that it’s much easier than I thought.

Why Leave Your Bank?
Credit unions are ideal for anyone who wants to know the people who operate their bank and easily ask questions about their finances and accounts. “We do very well serving people who are just in the very basic stages of understanding their finances,” Pear says. “That’s young people, a lot of young freelancers, and also low-income individuals who may have only ever gone to check-cashing stores. We have a lot of products that help people build their credit history, help repair their credit history.”

Since the money credit unions make goes back to members in the form of loans, it’s going to be reinvested into the community — in contrast to a big bank, which sends its profits to its shareholders, not customers. “It’s kind of like buying at a local clothing store instead of buying at a national chain,” Mattone says.

Finally, the current economic status quo is marked by massive inequality that fails most of the world’s population. It’s been a major issue during this election year, and much of Bernie Sanders’ popular campaign platform rests on the idea that the way mainstream banking is set up has led to a corrupt financial landscape, and that big banks are a crucial part of that infrastructure. Joining a credit union is one way to avoid contributing to the problem.

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Tagged in: Saving, Spending, Liz Pelly