Have you ever gotten the feeling that your bank doesn’t offer you the kind of products and services that you want? Do you want to support a local institution? It may be time to consider joining your local credit union. The benefits of credit unions are that they often offer many of the same products as traditional banks with the addition of higher interest on deposits, lower interest on loans, fewer fees, and more personal service.
Credit Unions aren’t for everyone, but 100 million Americans are now using them and their customers report higher levels of satisfaction than bank users.
What is a Credit Union?
A credit union is a not-for-profit cooperative financial institution. Credit unions are owned by their members and their purpose is to serve those members. When you join a credit union you become a part-owner of the institution. You’ll vote for board members and have a voice in how the credit union is run.
Credit unions offer many of the same products you’re used to getting from banks, including savings and checking accounts, loans, credit cards, and investment products.
Many credit unions have membership requirements. You may have to live in a specific location to join. Others are restricted to employees of certain organizations or other distinct groups. Once you join a credit union you can usually remain a member even if you no longer belong to that group. Many credit unions are making an effort to broaden their membership requirements and expand their membership bases, making it easier than ever to join a credit union.
The Advantages of a Credit Union
Credit unions offer a range of advantages:
- Lower costs. Credit union products are often cheaper than those offered by conventional banks. Around 80% of credit unions offer free checking accounts, which are available at less than half of banks.
- Lower interest rates. Credit unions usually offer lower interest rates on loans than banks. For example, The National Credit Union Administration reported in December 2018 that new five-year car loans from banks averaged 5.04% interest, with credit unions averaging just 3.57%.
- Better terms on your savings account. Credit unions often pay higher interest on your savings than banks and have lower minimum deposits on savings accounts.
- Easier loan qualification. If you don’t meet a bank’s loan criteria they are likely to reject your application. Your credit union is more likely to work with you to try to find a way to get the loan approved.
- Help when you need it. If you’re having financial problems or your credit is in bad shape, a credit union can be a much friendlier place than most banks. Many credit unions provide financial counseling and will make an active effort to help you get your finances back on track. Many credit unions provide ongoing financial education for their members.
- Deposit Security. Federal and some State credit union accounts are insured up to $250,000.00 by the National Credit Union Administration. Some privately-owned credit unions may use different insurance systems. Ask about deposit insurance before you join.
- Personalized service. Because credit unions are owned by their customers, they typically have customer-oriented policies and a warmer, friendlier atmosphere than many large banks (although this isn’t always the case).
- Community focus. Many credit unions support community charities and are active participants in community projects. Joining a locally-focused credit union may be a way to help your community while you help yourself!
What Are The Disadvantages of a Credit Union?
Credit unions aren’t for everybody. Consider the possible disadvantages before making a decision.
- Membership requirements. Credit unions may be limited to residents of specific communities or they may serve specific workplaces, schools, or faith-based groups. You will usually be able to find a credit union that will accept you, but options may be limited, and you may not be able to join the one you want.
- Smaller branch networks. Many credit unions only have branches in their host communities. Many credit unions belong to the Co-Op Organization, which has a network of 30,000 ATMs and 5,600 shared branches, but there’s no assurance that you’ll be able to find the products and services you need in a given location. If you often require banking away from your home address a credit union may not be your best choice.
- Limited online presence. If you need online banking services a credit union may not be your best bet. Many credit unions have only basic websites and they may not have mobile apps or other online service options. While many credit unions have caught up with online banking, they are still a bit behind private banks.
- Fewer options. Credit unions offer many of the same products as banks, but you may not have as much variety. There may be fewer types of accounts and credit cards available and a smaller range of associated rewards. The loan options in a credit union may be more accessible but you could have fewer types of loans to choose from.
Making Your Choice
Major banks offer a huge range of products, but many small customers will never use most of them. If you’re only looking for basic banking products and your priority is inexpensive, accessible, and personal service, a credit union could be an attractive option.
If you’re considering joining a credit union, this Credit Union Locator will help you find options in your area. Once you’ve identified some possibilities, pay them a visit and talk to them about the products they offer and how they could help you. You’ll have to consider the pros and cons, but if the balance works out in your favor it could be time for a change.