Advantages of Credit Unions

Some of the many advantages of credit unions stem from their focus on serving their communities and improving the financial health of their members. And although credit unions offer some of the same products as banks, there are a few notable differences. 

Just like with banks, when somebody becomes a member of a credit union, they can open checking accounts and savings accounts and access a lot of investment options. But unlike banks, credit unions are nonprofit financial institutions that are owned by their members.

This means the profits aren’t distributed to shareholders but are used to benefit members in the form of higher savings rates or lower fees, for example.  

Why Join a Credit Union?

As credit unions are founded on the fundamental principle of people helping other people, there are a number of obvious benefits to becoming a member.

Lower Fees and Rates 

Many credit unions offer some of the best rates on credit products. If you’re on the hunt for car loans, credit cards, or mortgages, credit unions offer financial products that tend to have lower and fewer fees than banking alternatives. Perhaps, one of the most important advantages is the lower interest rate or APR. 

A Higher Interest on Savings

Another avenue used by credit unions to distribute profits among members is higher interest rates on savings accounts. Banks don’t offer impressive yields to standard customers. 

Less Stringent Qualification Standards

One of the biggest concerns for many people who are looking to banks for loans is their nonexistent or poor credit history. Credit unions have more flexible requirements. Rather than flat out denying applicants a loan or a credit card, a credit union is more likely to work with members to try and work out a solution. 

Insured Deposits

Members’ deposits at federal credit unions and some state credit unions are insured through the National Credit Union Share Insurance Fund. Some credit unions are privately insured, but the NCUSIF is backed by the government and covers individual deposits up to $250,000.

However, bear in mind that privately insured credit unions are not government-backed, but credit union accounts are considered as secure as those provided by commercial banks.

A More Personalized Approach to Customer Service

Credit unions are more likely to help members by offering a personalized service. As nonprofit organizations, the unions focus more on your individual financial needs, and some credit unions also provide counseling and training to help members understand more complex financial issues.

For example, many credit unions have a certified credit counselor who can work with members to help them see the bigger picture. Members can get valuable insights into how they can get out of debt, increase their credit score, and secure their long and short-term goals.

Credit Unions Offer a Variety of Services

A credit union is smaller than a bank, but this doesn't mean it has fewer services to offer. The services on offer include mortgage loans, home equity loans, ATMs, overdraft protection, and much more.

A Strong Presence in the Community

Due to membership requirements, credit union members generally have a lot in common. The members are usually living in the same geographic region, so a credit union with a strong presence in the community focuses on meeting the needs of consumers.

Voting Rights

Another great thing about a credit union is that all its members are eligible to run for elections as board members or delegates. Each member counts as one vote, and elections are typically held once a year. This effectively makes all the members co-owners in a credit union, granting everyone a say in how a credit union is run and how decisions are made. 

Credit Unions Focus on Education

Part of the purpose and mission of a credit union is to educate members on a variety of credit and money issues. Credit unions often host financial workshops and aim to provide a comprehensive level of financial education to their members.

Things to Consider

There are some additional considerations to keep in mind before you leave your bank.

Membership Requirements 

Credit unions usually cater to a specific community or profession, such as schools, churches, homeowner associations, or labor unions. It may not be so easy to get into a credit union if you do not live in a certain location or you don't have a relative as a member. 

Accessibility 

Certain credit unions will only have a limited number of branches. If you live far away and you need to visit the credit union in person, this might be frustrating.

It’s worth noting that many credit unions provide access to ATMs or reimburse members when they use a machine belonging to another institution. Some credit unions may be a part of a larger credit union network which means you can conduct your banking at other branches.

Limited Credit Card Options

We are all used to having our accounts and credit facilities under one bank roof. But if you want to have everything in one place, you may not be able to find the same variety of credit options at your local credit union as you would with a large banking institution.

Potentially Inferior Technology

Most commercial banks offer a range of online avenues for accessing their systems and services, while some credit unions don't.

In Conclusion

If you believe a credit union might be a good option for your needs and you’re mulling eligibility requirements, it’s important to remember that some credit unions limit membership to certain types of workers or geographic areas, but many are open to all members. 

And while they offer lower fees and higher interest rates on your savings, make sure you do a bit of research on credit unions in your area before you leave your bank. Credit unions are not all the same. Therefore, you need to make sure that the organization you choose has the right rates and fees and fits your financial needs.