The Credit Union Difference
Benefits of Belonging to a Credit Union
There are a number of financial institutions available, yet you have chosen to be a member of a credit union. Why? Maybe it’s because you know all of the great benefits, products, and services provided by credit unions. Or maybe it because you do know what other options are available. The following lays out some of the different types of financial institutions that are available and the reasons for the differences. Credit Unions provide an alternative to the commercial bank. Almost all credit unions are not-for-profit cooperatives, which means as a member you are also an owner of your financial institution, and profits go back into the credit union so it can offer lower interest rates and higher interest on savings. Typically, credit unions operate mainly in the community where they are located. Credit unions operate with the “people helping people” philosophy. You are one of more than 100 million credit union members nationwide.
Credit unions are organized as not-for-profit institutions, which means they do not have shareholders for whom they are attempting to make a profit. Rather, credit unions have members who support the functioning of the credit union by paying interest on loans they take out. In other words, the credit union only exists if it has members enough to cover its operating costs. When it does, it can give back any excess “profit” over and above operating costs in a number of benefits that are not typically available through commercial banks. Such as:1. Higher interest rates on deposits--means depositing money in an account at a credit union earns you more per dollar than the same deposit in a commercial bank2. Low or no fees for using the savings or checking account--many commercial banks charge a fee to use their services, these fees are lower or nonexistent at most credit unions3. Lower interest rates on many loans (including student loans)--all loans come with an interest rate that make it possible for the financial institution to accept the risk of the loan. That said, credit unions, because they are more restrictive and are not looking to make a profit, can afford to charge lower interest rates on their loans. That means that you end up paying less money for a loan from a credit union than you do from most commercial banks.4. Low or no minimum balances to keep an account open--many commercial banks charge a fee to keep an account open that has too small of a balance. This is not the case with credit unions, which makes them a perfect place for young members or families with little discretionary income, who do have a lot of money to keep in an account for long periods of time.5. Share of the profits in the form of dividends--because credit unions are not-for-profit if they earn more than they spend in a given year from loan interest payments they give it back to their members in the form of yearly dividend payments.6. Low interest rate credit cards--some credit unions offer lines of credit or credit cards to their members, and they often do so at a lower interest rate than many credit cards offered through for-profit companies or commercial banks.Although some people still prefer commercial banks, claiming that credit unions are too restrictive or do have enough locations or ATMs to be as convenient as commercial banks, many of these common complaints about credit union are outdated. Many credit unions have as many, if not more, locations, than commercial banks, and offer membership to almost anyone.With all of these benefits of being a credit union member it is no wonder you chose to keep your money safe in your local credit union.
Credit unions exist as a place for members to safeguard their money in federally insured checking or savings accounts. But is that all they do? Not in the least. Read on to learn more about the products and services offered by many credit unions.
Checking accounts. In addition to just being a place to deposit money, many credit unions offer the same features for accessing your money as commercial banks, including debit cards, ATM access, and easy deposits and withdrawals from branch locations. In addition, many checking and savings accounts have no or very low fees, do require a minimum balance, and offer other rewards (like free checks, or lower rates on loans).
Saving and investment accounts. Credit unions offer savings options to two different kinds of savers. First, the traditional saver who deposits money in a savings account to keep it safe and earn interest until it is needed. Second, the investor who works with the credit union to use their savings to participate in the stock market. The credit union will take deposited funds and use them to purchase shares of stocks based on the member's investment preferences (high or low risk). The credit union will sell the stock and redeposit the funds into the members account on their request. While this type of saving can result in higher return than a typical interest rate, it does come at a higher risk of loss.
Consumer Loans. Credit unions will offer loans to their members including auto loans, personal loans, and student loans. These loans typically come with a lower interest rate for members than loans from a commercial bank. In addition, many credit unions offer special repayment options for their members, like the ability to take a month or two off from making a payment without any penalty, traditionally called Skip-A-Pay.
Mortgage Loans. Many credit unions offer larger loans for mortgages, including both fixed and adjustable rate terms. The interest rates for mortgages will be competitive, although not necessarily lower than those at commercial banks. However, mortgages given by credit unions do come with the benefit of homebuyer seminars and information sessions available only to members.
Credit Cards. Many credit unions have begun offering credit cards to their members. These cards often have lower interest rates than those found in the regular credit card marketplace and some even offer extra discounts for members who have their paychecks direct deposited into credit union accounts.
Additional services offered by credit unions include safe deposit boxes for valuables or documents that need extra protection, money order issuance, and free online account access and bill pay. For many members, using a credit union for everyday access and safeguarding of their money is as convenient as using a commercial bank and comes with the added member benefits not found in commercial banks.