Conversion Usually Means Worse Rates

Credit unions that have converted to banks charge their customers more.



A 2006 study by the Economics Department of the University of Wisconsin at Whitewater found that, in every savings and loan product studied, credit unions that have converted offer worse rates:

Customers now earn less on their savings...
  Credit Unions Converted Credit Unions Difference
Regular Savings Accounts 0.93 0.61 -.32
Money Market Accounts 1.19 1.01 -.18
Checking With Interest 0.47 0.42 -.05
One Year CD 3.17 3.14 -.03
...and pay more on their loans.
Unsecured Loans 11.02 12.14 +1.12
Regular Credit Cards 12.03 13.49 +1.46
Gold Credit Cards 10.38 11.16 +.78
Used Auto Loans 5.41 6.25 +.84
New Auto Loans 5.17 5.83 +.66
Home Equity Loans 5.97 6.07 +.10
Photograph of Upside Down Piggy BankPhotograph of Coins Falling From the Air
Data from Heinrich and Kashian, Credit Union to Mutual Conversion: Do Rates Diverge?
University of Wisconsin-Whitewater, 2006. p16. More recent data tracking: Credit Union and Bank Average Rates (Including Converted Credit Unions)


Credit unions offer better rates than banks do.

Here is a current comparison of credit union vs. bank rates in your state. The column on the right called "variance" shows the difference in rates at credit unions vs. banks. Remember, as a consumer you want low interest rates on loans and high rates on savings.

Why do credit unions offer better rates?

Photograph of Piggy Bank with Coins Stacked Around It
Credit unions offer better rates than banks do because they are non-profit cooperatives. As non-profits, credit unions are exempt from federal, state, and local income taxes, and don’t pay their earnings out to shareholders, so they have lower costs. Because credit unions are member-owned cooperatives, they choose to pass that savings along to member like you, in form of better interest rates. Their legal mission is to serve members, not to make profits.

As a bank, your credit union would have a new 34-45% tax on income. If it issues stock, it will have a legal duty to maximize profits to shareholders. How will it pay for these costs? How will the shift to a for-profit mission affect rates? Look at the chart above and see for yourself.