Have you grown frustrated with your bank and started looking for alternatives? You may want to consider switching to a credit union.
Credit unions offer most of the same financial products and services that banks do, with equivalent deposit security – the National Credit Union Administration (NCUA) insures credit union deposits to $250,000, just as the FDIC does for bank accounts.
By definition, credit unions must limit membership, but that definition can be very broad. It can be open to membership in a trade or profession, residence in a geographic area, or some other commonality. A Credit Union Directory is available at the NCUA website; you are likely to find one that you can join.
The advantages of a credit union all stem from one aspect – they are not-for-profit organizations. Instead of dealing with bank management that is beholden to shareholders and profit demands, credit unions are collectives. All members are effectively owners through their deposits.
Without the burden of generating and growing profit, credit unions can direct more resources toward providing benefits to their members. These benefits include:
- Lower Fees and Simpler Terms – Checking and savings accounts generally have lower minimum limits and fewer restrictions with credit unions as compared to banks. Credit unions also tend to have fewer and/or lower fees for auxiliary services.
- Higher Interest on Deposits – Savings and checking accounts, certificates of deposit, and other interest-bearing accounts usually pay higher interest rates than their counterparts do at traditional banks. Rates are comparable to, if not better than, low-overhead online banking products.
- Lower Interest on Debt – Interest rates for credit cards, mortgage loans, and auto loans are usually lower with credit unions. For example, in an infographic from IBM Southeast Employees Federal Credit Union, average standard credit card rates in September 2011 were given as 13.22% for banks compared to 11.64% for credit unions, and credit union mortgage rates were anywhere from 0.05-0.50% lower than banks depending on the loan type.
- Loan Flexibility – While credit unions have to deal with the same federal restrictions and scrutiny on loans as banks do, a credit union is more likely to allow latitude in a loan application with imperfect credit history. Moreover, through the member-focused personal service, they are more likely to steer you toward a home or vehicle loan that fits your needs instead of one that benefits the lender.
- Personal Service – of course, this is subjective, and many people have had good experiences at banks and bad experiences at credit unions. However, the ownership aspect of credit union membership gives greater incentive for personal service – employees have the same goals as the customers. You are likely to find smaller branches, more face-to-face service, and fewer automated phone service menus.
Even with these advantages, credit unions are not going to be everyone's preferred choice. Most credit unions offer fewer financial products than banks, have fewer locations, and a smaller national footprint. If your credit union does not have cooperative agreements with other credit unions, you may also face higher ATM fees to access your money while traveling.
Additionally, some people do not consider face-to-face service a plus and prefer to do everything online. Credit unions do have an online presence, but it is generally not as extensive as that of banks.
For most people, credit unions represent solid financial products at excellent rates. If you need more advanced financial services or a more national presence, you may prefer a more traditional bank. In either case, it is certainly worth your time to investigate your options.
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