Today, banks are making the largest amount of profit they every have. They also raising fee’s for their customers more than they ever have! With the financial world being bank centered, where can you put your money that will keep it safe while avoiding so many unnecessary fee’s? One option that you should keep your mind open to is a credit union.
A credit union is similar to a bank in the sense that it offers multiple financial services. A credit union looks to boost their customers profits and overall grow their savings. Credit unions often times will offer the same services as a bank for a much lower cost. They typically have few fees, and the ones that they do have are very low. Though the appeal of low upfront charges is enough to draw some in, others see the downside to using a credit union and choose to stay with a traditional bank.
What is a Credit Union?
As said before, a credit union is an institution that offers financial services for your fiscal needs. Like banks, they offer savings accounts, certificates of deposit (CD), loans, and credit cards. Unlike a typical bank, though, credit unions are a not-for-profit business. Since a credit union is not trying to make money off of your investments, they tend to offer higher interest rates on savings accounts and CDs. They will also have lower interest rates on money that you owe them such as charges made on a credit card.
Credit unions are centered around their members and is owned and operated by members. A bank, on the other hand, is operated by a CEO. When you pay an initial fee to a credit union, you are buying a part of the company and will own a small chunk of the large cooperative. This feature gives you the right to have a say in all of the credit union’s decisions.
Since you receive partial ownership, certain credit unions may only accept specific members. If the corporation you work for has a credit union, it is likely to only accept your family members and fellow employees. Many school districts have credit unions and accept the teachers within the area into their cooperative. Others are more relaxed and will allow anyone in the general area to join. Credit unions are backed and managed by the National Credit Union Administration (NCUA). Like the FDIC, they will insure your money, making a credit union a very safe place to keep your money.
Credit Union Advantages
When you join a credit union, you will notice the differences between it and a large bank quickly. Credit unions offer many perks that traditional banks don’t.
At a credit union, you will receive higher interest rates, therefore, you will have a higher annual percentage Yield (APY). Whether you have a savings account, a money market, or a checking account, the interest you earn on the invested money can have anywhere from 4 to 10 times higher overall profit than the same type of account at a bank. If you choose to bank online, you can possibly find competitive rates there, but a local, physical bank will likely not ever find an interest rates as high as at a local credit union.
A credit union’s loan and credit services are also cheaper. When taking out a loan through a credit union, you will get a lower rate than at a bank. Many people choose to take large loans, such as for a home or car, from a credit union because their rates are much lower than a dealer’s financing or a bank’s loan. Banks and dealers will typically be higher by a percentage point at least. When looking at the numbers at first, it may not seem like much, but over time, the pennies add up and the bank’s rate will cost you more in the long run.
Credit unions typically have much lower fees as well. They offer services like withdrawals, checks, and online transactions for free. Accounts tend to have no minimum balance and don’t have a monthly service fee. The savings you will have in monthly fees could be hundreds of dollars at the end of the year. Credit unions still typically charge if you have a check bounce or have an overdraft, but they will be much lower and have a smaller cap unlike a bank.
Customer service is a top priority for credit unions. Banks typically have a long chain of command and is under a board of directors that are looking to make money. A credit union, on the other hand, is owned by the members, so keeping the members happy is top priority. Service at a credit union is typically better than at a bank. Tellers at a credit union take the time to treat you kindly and may even learn your name if you visit often enough.
Credit unions often have more flexibility and fewer complications as well. Credit unions are more willing to work out terms for a loan if you have bad credit since they are user oriented. If you have good standing with that specific credit union, they may even have forgiveness policies. Credit unions tend to not have any fine print and are very upfront about their policies.
Credit Union Disadvantages
Though credit unions offer very unique features that allure in many customers, they also have some downsides.
Most credit unions do not offer as many products as a larger bank. A bank typically has multiple types of checking and savings accounts, many types of credit cards, and many ways to invest your money. A local credit union, however, may only have basic accounts and only a few options for credit cards and loans.
Since credit unions are localized, they typically have fewer locations of service. Large banks normally have thousands of locations with great online services, but a credit union may only have ten or so physical locations and a less than average website for online options. Credit unions often offer mail-in services, but if you need a service immediately, this is not convenient at all. Credit unions typically will have shorter hours than a big bank and have less ATMs. Credit unions have many perks that make their services great, but they can be hard to access if you move around or travel a lot.
Should I Join a Credit Union?
Credit unions are member oriented institutes that have few fees on their many financial services which can save you hundreds of dollars. They typically have higher APY rates on accounts that earn interest and grow over time. You can find loans and credit cards with substantially lower rates at a credit union. If you are on the road often, a credit union may be hard to access due to their limited locations and online services. Joining a credit union over a bank comes down to your occupation and lifestyle. Weigh your options before you make your decision.