A credit union is a different kind of financial institution. Its focus is on providing personalized service to its customers and the community, rather than making a profit for outside stockholders.
Here are the reasons that it makes sense to keep your money in a credit union.
What Is a Credit Union?
A credit union is a financial institution that offers a full range of banking services. It is a nonprofit organization owned by its members, not outside stockholders.
Any profits that the credit union earns are reinvested back into the credit union or distributed as dividends to its members.
Read More: How to Join a Credit Union
Customers Come First at Credit Unions
A credit union is a nonprofit organization that puts customer service first, not making a profit. Its members are the owners of the credit union, and the members of the board of directors all serve on a voluntary, unpaid basis.
Credit unions view themselves as co-ops that exist for the benefit of their members, not to return dividends to shareholders.
Credit union members have the right to vote on important credit union issues. For example, members get to vote on issues such as whether to open another branch or add new services and products. They get to share their opinions and benefit from the decisions.
Each member gets one vote regardless of the amount of money they have in their checking and savings accounts.
The members vote on the election for board members. This gives members a voice on who gets to serve on the board of directors of the credit union. Members have a say in setting policies and the direction of their credit union.
Bank personnel are more accessible at credit unions. They have a friendlier style and are more willing to help their members. Their actions are focused on improving the financial well-being of their members.
Credit Unions Have a Community Presence
Credit unions like to maintain an active presence in their communities. For example, credit unions might sponsor annual golf outings to raise funds for charity, offer college scholarships to local teenagers, adopt needy families for the holidays and participate in charity walks.
Credit unions want to be good citizens in the local community, and they work continuously to fulfill that role.
Read More: Negotiating Interest Rates With Credit Unions
Credit Unions Have Lower Fees
Since all profits from the credit union are reinvested back into the business, the credit union is able to offer checking and savings accounts with lower fees. Many credit unions may even offer checking accounts with no minimum balances and no monthly fees. They might also offer free checks and free electronic transfers. Even better, credit unions pay higher interest rates on savings and money market accounts and charge lower rates on their loans.
In fact, federally chartered credit unions are not permitted to charge more than 18 percent on their credit cards and most loans. More than likely, the interest rates you currently pay on your credit cards is higher than this.
If you're shopping for a mortgage or an auto loan, you may find that your local credit union has rates that are even competitive with online banks.
Sometimes, earnings are distributed as dividends and deposited into members’ accounts at the end of the year. This is a nice bonus to receive because you're a member of the credit union.
Credit Unions Offer a Full Range of Banking Services
Credit unions offer a broad range of services including electronic banking, credit cards and free ATMs.
Credit unions can range in size from very large, like the Navy Federal Credit Union with eight million members, to small credit unions, which may have only one branch. However, these small credit unions make up for their lack of size by participating in national ATM and shared branch networks. Members can have access to more than 30,000 ATMs. They're not restricted to just using ATMs at their local branches.
Credit Unions Will Work With Bad Credit
Credit unions are more forgiving if you overdraw your checking account or have a lower credit score. Credit union personnel will put more effort into finding ways to work with you, even if you're temporarily out of work or facing some difficult financial situation.
If you have difficulty qualifying for a loan because of poor credit, the loan officers at a credit union will schedule one-on-one meetings and take a positive approach to find loan terms that will work for you. Loan approvals at credit unions don't rely totally on computer algorithms to approve or deny your application. They prefer to meet directly with their members and try to find ways to get loans approved, rather than giving you a long list of reasons why your loan can't be approved.
They might also enroll you in an educational program to construct a personal budget which can help you cut expenses, increase savings and find ways to improve your credit score. It's like having your own personal financial advisor to guide you along the path to financial security.
Read More: What Is a Share Draft From a Credit Union?
You Must Qualify to Join
If it sounds like credit unions are only for exclusive groups, they're not. They cater to a wide range of customers.
Credit unions are set up to serve certain employers, geographic location homeowner associations, and groups such as churches and schools. Some credit unions even allow certain relatives of members to join.
Although credit unions cater to a specific type of customer, it's not too difficult to find a credit union in your area to join. Quite often you can join a credit union if you just live in a specific geographic area.
Credit Unions Offer Education and Financial Workshops
Credit unions focus on improving the financial health of their members. They often hold financial workshops and offer financial advisory services. Many offer free classes to other people in the community and conduct free financial seminars at local employers.
Some credit unions start training their members early by offering financial management courses to kids and teenagers.
Deposits Are Guaranteed by NCUA
Your funds are secure at a credit union. Deposits at credit unions are insured for up to $250,000 by the National Credit Union Administration.
Credit unions have a customer-focused objective and a desire to be part of the local community. Since credit unions are nonprofit financial institutions owned by its members, they are able to charge lower fees, offer lower interest rates on loans and pay higher rates on savings and money market accounts. Credit unions are attractive alternatives to traditional banking facilities.
- Investopedia: 6 Benefits of Using a Credit Union
- Nerdwallet: What Is a Credit Union? The Benefits of Membership
- Experian: What Are the Benefits of a Credit Union?
- CreditKarma: Benefits of a Credit Union
- National Credit Union Administration: Permissible Interest Rate Ceiling
- MyCreditUnion.gov. "What Is a Credit Union?" Accessed May 22, 2020.
- Debt.org. "Credit Unions." Accessed May 22, 2020.
- National Credit Union Administration. "Comparison of Average Savings, Deposits and Loan Rates at Credit Unions and Banks." Accessed May 22, 2020.
- American Heritage Credit Union. "How Credit Unions Serve Their Communities." Accessed May 22, 2020.
- CO-OP Financial Services. "CO-OP Shared Branch." Accessed May 22, 2020.
- Qualtrics Experience Matters. "USAA and Credit Unions Lead Banks in Customer Experience." Accessed May 22, 2020.
- PenFed Credit Union. "Why Is It a Share Account Instead of a Savings Account?" Accessed May 23, 2020.
- Consumer Financial Protection Bureau. "What Is a Credit Union Share Draft Account? Is it a Checking Account?" Accessed May 23, 2020.
- Consumer Financial Protection Bureau. "What Is a Certificate of Deposit?" Accessed May 23, 2020.
- Consumer Financial Protection Bureau. "What Is a Money Market Account?" Accessed May 23, 2020.
- Consumer Financial Protection Bureau. "Checklist for Opening aBank or Credit Union Account." Accessed May 23, 2020.
- Experian. "Can I Get a Loan From a Credit Union With Bad Credit?" Accessed May 23, 2020.
James Woodruff has been a management consultant to more than 1,000 small businesses. As a senior management consultant and owner, he used his technical expertise to conduct an analysis of a company's operational, financial and business management issues. James has been writing business and finance related topics for work.chron, bizfluent.com, smallbusiness.chron.com and e-commerce websites since 2007. He graduated from Georgia Tech with a Bachelor of Mechanical Engineering and received an MBA from Columbia University.