How to Switch From a Bank to a Credit Union

With the high cost of living and rising daily expenses, many Hawaii residents are seeking ways to make their money work harder for them. One of the most effective strategies to stretch your finances is to reconsider your banking relationship and potentially join a credit union (if you haven’t already).

Rising bank fees, increased interest rates, and unsatisfactory service are just a few reasons to consider switching from a bank to a credit union. The process is more straightforward than you might think, and we are here to help make your transition from your current financial institution as smooth and convenient as possible. Best of all, you can complete this transfer at your own pace, ensuring there are no disruptions to your finances. 

Contact us today or continue reading to learn more about switching to HFS FCU. 

Why Switch From a Bank to a Credit Union?

Unlike banks, which are for-profit institutions held answerable to shareholders, credit unions are member-owned, non-profit institutions that return any profits back to their members through lower fees and better rates.  There’s also a strong community aspect of joining a credit union. Credit unions are deeply rooted in their local communities, support the same causes as their members, and provide personalized service that is often lacking in larger banks. 

Moreover, banking with a local credit union is just as safe as banking with any bank. Credit unions are insured by the government-backed National Credit Union Administration (NCUA) up to $250,000 per individual, similar to the protection offered by the FDIC for banks. 

Credit Union vs. Bank: Key Differences

Here’s a look at the key differences between banks and credit unions to help you make your decision of where to bank:

How to Switch From Your Bank to a Credit Union (Step-by-Step)

Switching from a bank to HFS FCU is easy and convenient. If you’re interested in making the switch, we recommend taking your time and completing the process over several weeks before closing your old accounts. Here’s a step-by-step guide:

Step 1: Research and Choose Your Credit Union

Before deciding to switch, it’s important to research credit unions in your area to find the best fit. Consider the following factors during your research: 

• Rates and fee schedules
• Available products
• Branch and ATM locations
• Mobile banking features
• Membership eligibility requirements

Serving the community with its banking needs since 1937, HFS FCU membership is open to all who live, work, worship, attend school, volunteer or participate in associations headquartered on the island of Hawaii. 

Step 2: Open Your New Credit Union Account

Once you’ve selected a credit union, the next step is opening your savings and/or checking account. This process is quick and easy, and you can do it at your local HFS FCU branch or online. You will need the following documents to get started:

• Government issued ID
• Social security number
• Proof of residency
• A minimum opening deposit of $50

When you open your account, be sure to set up online and mobile banking to ensure 24/7 access to your funds.

Step 3: Move Your Direct Deposits

Next, redirect income sources to your new account, a key step in any transition. This is a crucial step in your transition and may take a few pay cycles.

Start by contacting your employer’s HR or payroll department with your new account and routing number. Be sure to inform them about any other income sources you have.  Monitor your new account through online banking, and once you see your paycheck deposited in your new checking or savings account, this step is complete.

Step 4: Transfer Automatic Payments and Subscriptions

The final key step is to review and update any automatic or subscription payments. We suggest reviewing the last 12 months of bank statements and carefully looking for any automatic withdrawals from your account. Common automatic transfers and subscriptions include insurance premiums, fitness memberships, loan payments, rent/mortgage and streaming services.

Make a list of all your automatic payments and subscriptions and handle these in batches. We suggest updating a few each week rather than all at once.

Step 5: Close Your Old Bank Account

The final key step is to review and update any automatic or subscription payments. We recommend examining the last 12 months of bank statements to identify any automatic withdrawals. Common automatic transfers and subscriptions include insurance premiums, fitness memberships, loan payments, rent/mortgage, and streaming services.

Before closing the account, consider speaking with a credit union representative to ensure your direct deposits, automatic payments, debit card activity, and account transfers are all transferring properly to your new account.

After you close out your account, be sure to shred old debit cards, credit cards and checks.

Tips for a Smooth Bank-to-Credit Union Transition

As you make the transition from a bank to a credit union, here are some helpful tips to keep you organized and on track:

• Create a checklist or spreadsheet that outlines each step involved in the transition. Cross off items as you complete them, and address anything that still needs updating.
• Set up account alerts with your new credit union. This can help you monitor any deposits and payments during the transition period.
• After completing your transition, take the time to explore the other products offered by HFS FCU. These may include options like refinancing an auto loan, opening a home equity line of credit (HELOC), acquiring a new credit card, or establishing a share certificate to enhance your savings. Typically, credit unions offer better rates than banks and other lenders, enabling you to save more money.

Ready to Ditch the Big Bank? Join HFS FCU Today

Experience lower fees, better rates, personalized service, and local roots. These are just a few of the advantages of switching from a bank to a credit union, and they explain why many have recently chosen HFS FCU. Are you ready to take advantage of all the benefits a credit union offers?  Contact HFS FCU to schedule an appointment and start the membership and transition process today.

FAQs

How long does it take to switch from a bank to a credit union?

The entire process can take several weeks. While joining a credit union and opening an account can often be completed within hours or days, transferring funds and activating direct deposits and bill payments usually takes several weeks. It’s recommended to keep your old accounts open during this period.

Does switching banks affect my credit score?

No, membership in a bank or credit union is not considered a credit product, so it won’t directly appear on your credit score. However, switching can indirectly affect your credit score. For example, closing a line of credit with your bank may lower the average age of your credit accounts, impacting your score. Additionally, your new institution might perform a hard credit inquiry when you open a new line of credit, which can temporarily decrease your score.

Can I keep my bank account open while I transition to a credit union?

Yes, you can and should keep your bank account open during the transition. In fact, it is advisable to maintain your previous account for at least 30 days. This overlap period allows you to address any issues with direct deposits or automatic bill payments.

What documents do I need to open a credit union account?

To open an account, you’ll need proof of membership eligibility, a Government Issued ID, proof of residency, and your Social Security number.

Who is eligible to join HFS FCU?

Membership is open to all who live, work, worship, attend school, volunteer or participate in associations headquartered on the island of Hawaii. 

Do credit unions offer the same services as banks?

Yes, credit unions provide the same core products as banks. The main difference is that credit unions are non-profit, member-owned institutions that return profits to their members through better rates and lower fees.

Is my money safe at a credit union?

Yes, your money is just as safe at a credit union as it would be in a bank. The government-backed National Credit Union Administration insures credit unions up to $250,000 per individual, comparable to the protection offered by the FDIC for banks.

Can I switch just my checking account and keep other accounts at my bank?

Yes, you are not required to move all your accounts to a credit union if you choose to join. However, managing your finances across multiple institutions may prove challenging, especially for transfers.