Credit union members have far greater access to free checking accounts than customers at the largest banks and thrifts, according to a recent study from

Bankrate found that nearly three-quarters (72%) of the 50 largest CUs in the United States still offer standalone free checking accounts, almost double the rate (38%) at the largest banks and thrifts.

Five years ago, the corresponding figures were 78% and 65%, respectively, suggesting that both types of financial institutions are disposing of free checking, though banks are doing so at a far greater frequency.

The study also found that an additional 26% of the credit unions provide checking accounts that become free subject to the satisfaction of certain conditions, namely if the member uses services such as e-statements, direct deposit or a combination of both. As such, virtually all (98%) of the largest CUs offer free checking in one form or another.

Credit union members also face lesser penalties for having insufficient funds in their checking accounts — Bankrate's found that the average overdraft fee at credit unions amounted to $26.78, vs. $32.74 at the banks.

Credit unions also make it easier to open new accounts. Bankrate noted that 62% of the credit unions they evaluated required no minimum opening deposit, while none asked for more than $100 to open an account. On average, the minimum payout necessary to open an account was only $9.84. For example, even the biggest credit union of them all, the $64 billion Navy FCU of Vienna, Va., charges no monthly service fee and requires no minimum amount of money to open an account.

When it came to ATM access, the advantages provided by credit unions were less pronounced. Some 30% of the CU accounts surveyed offered at least one free out-of-network ATM withdrawal per week. Of those credit union accounts that levy a charge for out-of-network ATM withdrawals, $1.50 was the most frequently applied fee (vs. a $2.50 penalty at banks).

In addition, virtually all (96%) of the surveyed credit unions charge non-members for withdrawing money from the credit union's ATMs — roughly the same as banks. Both credit unions and banks typically tack on a $3 charge to non-members (or non-customers) for this service. In addition, credit unions offer minimal interest rates on checking accounts (as little as 0.1%).

But monthly fees charged by credit unions (generally either $2 or $3) are only half of what banks impose.

Thus, on the whole, Bankrate noted, CUs offer a better deal for checking account members than banks.

"When evaluating checking accounts, consumers should definitely include credit unions in their search," said Greg McBride, CFA, Bankrate's chief financial analyst, in a statement. "They have competitive offerings and many participate in large ATM networks that extend the credit union's reach."

In an interview with Credit Union Journal, McBride explained that for both credit unions and banks, fewer are offering free checking due largely to increasing regulatory burdens, as well as to slimmer debit card interchange fees and other vanishing sources of revenue. "As for-profit entities, banks have to act more aggressively in order to recoup such lost revenues," he said.

Indeed, he said, overdraft fees at banks have soared in recent years, while they have remained essentially flat at credit unions.

McBride further noted that, unlike banks, free checking accounts can be found at credit unions of all asset-sizes. In contrast, smaller banks and community banks are more likely to supply this service rather than the mega-banks.

Heather Messing, assistant manager at Informa Research Services, a market research company that serves financial services organizations, said that the overall trend is definitely for fewer banks and credit unions to offer free checking. But, Messing added, there is always some institutions that will "buck that trend" if it feels necessary to do so.

However, Rob Rubin, managing director at Novantas Inc., a management consultancy and information services provider for the financial services industries, said that after this prolonged environment of low interest rates, in the likely event that rates rise again, banks and credit unions will be more willing to give away free checking accounts because they will be able to make more money on the spread.

Rubin also noted that one disadvantage that credit unions face simply has to do with the general public's lack of knowledge about the movement, which may serve to dissuade consumers from seeking out credit union services and signing up for accounts.

He cited that in places like Austin, Tex. and Madison, Wis., this problem does not exist since they have very high rates of credit union membership.

But in other cities, like New York, too many people do not even know what a credit union is and, hence, would not even think of applying for an account at one.

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