What Are The Disadvantages Of Credit Unions?

What Are The Disadvantages Of  Credit Unions?

When it comes to our finances, we always want to get the best rates and above all – want to know that our money is safe. The global financial crisis has caused many banks and other lenders to go bankrupt, leading some of us as customers to panic!

Wondering what we should do with our money, where should we put it? Can we even trust a bank anymore? Well, what is the alternative?!

Credit Union

Credit unions can be a fantastic alternative to a traditional bank, but it’s not without its disadvantages. Let us guide you through that today – what are the disadvantages of credit unions (and other important information!) 

What Is A Credit Union?

Credit unions are normally non-for-profit organizations that are run by its members and owned by those who use their services. The members can get similar services from that of a traditional bank including credit cards, savings and loans.

Overseeing the operations are a board of directors that are elected by the members with the goal to keep the ship running smoothly!

Credit unions try to offer competitive services and products at very good rates. Although credit unions will still charge interest on things such as loans, they’ll be far lower than most banks and the profits will be reinvested back into the union.

Banks VS Credit Unions – What’s The Difference?

Banks are normally open for everyone, whereas credit unions typically are open to membership applications from people within a particular group. For example, a police credit union or a New York credit union.

Banks operate for profit and generally offer unfavorable rates of interest with their products whereas credit unions offer very competitive rates to its customers. However, banks may be able to offer more services and products than a credit union.

Most banks offer mortgages and a wide variety of loans and credit cards. Most credit unions have limited product offers, but that is often to keep the financial stability under control.

More to this, banks can offer larger sums of money for loans or credit whereas a credit union might have a limit of $3000.

Main Disadvantages Of A Credit Union

Some of these disadvantages we’ve just discussed. Typically, credit unions are not open to everyone as such. You’ll need to be part of a group, community, area or career and meet certain eligibility requirements.

Banks normally allow almost anybody to have access to their products and services. Even with a customer’s poor credit, banks will counter their offer with an even higher rate of interest.

Secondly, as we’ve seen – credit unions usually offer small loans or small limits of credit and some do not offer certain products like mortgages. Depending on your needs, a credit union might have little to no advantage to you.

Another disadvantage is the lack of ATMs and branches. If you have a bank account, you’ll usually find a branch or ATM somewhere in your local area, or wherever you may be travelling. It is not that simple for credit unions.

They’re normally very localized, so if you’re out of town or in another state – you’ve got problems.

It’s not to say you can’t withdraw cash from any ATM, but it does mean that you’ll normally have to pay a fee to access your own money. That problem alone takes away any possible advantage you may have thought about a credit union.

Further problems come with how unmodern credit unions are. Banks tend to develop, adapt and grow overtime with technological advances being helpful to them.

For example, with the availability of smartphones, laptops and tablets – online banking and mobile banking has become a very popular tool for customers to keep an eye on their finances.

Along with the advancement of online security and the bank’s fraud systems – we can now rest assured that we’re protected.

Credit unions usually are entirely focused on their interest rates and overall financial stability.
It is very unlikely that a credit union will have an app at the same time as a bank for you to keep track of everything – one, because they see no need and two, because it costs money to have these types of services.

Due to their slow uptake of this type of tech, credit unions may not have been very enticing.

Generally, credit unions will adopt technology but only after it has been tried and tested and become the “norm.” Often though, this is too late.

Speaking of technology, there are now options for an online-only banking service. Some people opt for this option as it fits into their lifestyle. Credit unions due to their operational methods, will not have this option.

Reiteration: Disadvantages Summed Up

So, let’s sum up what we’ve learned into handy chunks. The main disadvantages of credit unions are:

  • Memberships: They’re often only open to certain people that meet certain criteria. This can be a lot of hassle and headache!
  • Location: Limited branches and ATMs mean you’re kinda stuck. If you’re not near the credit union location, you might be forced to pay fees to access your own money. Outrageous!
  • Lacking in tech: Due to their financial strategies (being non for profit) they might not adopt popular technology as quickly as banks, leaving the customer out in the cold for incredibly sought after tech.
  • Fewer products/services: Banks can offer you pretty much anything. Mortgages, loans, credit cards etc. They can also offer you a large amount of money/line of credit. Credit unions will offer a small amount and a limited number of products.


If you’re considering joining a credit union, it’s worth knowing these disadvantages. It’s always advised to speak with an independent financial advisor before doing anything with your money, however the choice is ultimately yours. 

Think carefully before you apply for credit union membership and pay close attention to location and services that are offered. Above all, it is important to keep track of your finances and make informed decisions that’s best for you. 

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