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There are many benefits of credit union membership.
But what is a credit union? Unlike banks, credit unions are owned by the members they serve. This means that any profits can be given back to credit union members in the form of lower fees and higher savings rates.
A lot of credit union members like the idea that their checking and savings accounts help other members of the credit union get mortgages to buy their first homes or secure business loans to build the businesses of their dreams.
As Glenn Welch, president and CEO of Freedom Credit Union, describes it, “Credit unions and other financial cooperatives encourage people to come together for the financial betterment of their communities and their members.”
Benefits provided by credit unions
Since credit unions are not-for-profit financial institutions, they can focus on providing better services for their member-owners. You can potentially benefit from this in a variety of ways.
Personalized customer service
Credit unions may go above and beyond to help their members reach financial success through personalized service. Since credit unions are not-for-profit institutions, they can focus on helping members with their individual financial needs.
Some credit unions also provide training and counseling to help members understand complex financial matters.
Higher interest rates on savings
Unlike for-profit banks, credit unions can give profits back to their members in the form of higher interest rates on products like CDs and savings accounts.
Credit unions tend to have lower fees. They sometimes even have fewer fees for typical banking products.
Lower loan rates
The price to borrow money from a credit union, known as the interest rate or APR, is typically lower than it would be from a bank.
Because of the membership requirements, credit union members often have similar interests, live in the same geographic region, work closely together or are involved in a common organization. Members generally enjoy being a part of a financial institution that focuses on the needs of consumers just like them.
When you’re a credit union member, you get to vote on important credit union decisions, including the selection of credit union board members. That’s because when you become a member, you also become a co-owner of the credit union.
Welch adds, “As a member, you have a say in how the credit union is run, and benefit from those decisions.”
Variety of service offerings
Just because a credit union may be smaller than a bank doesn’t necessarily mean it has fewer services. In addition to financial education and counseling, credit unions often offer consumer loans, shared branches with other credit unions, electronic banking, ATMs, home equity loans, mortgage loans, member business loans, credit cards, overdraft protection and more.
Of course, some credit unions may not have as many products and services as other financial institutions, but they generally tend to cover a lot of banking needs.
Federal credit unions (and some state credit unions) are insured by the National Credit Union Administration via the National Credit Union Share Insurance Fund, whereas some credit unions, including many state-chartered credit unions, are privately insured.
The NCUSIF is backed by the U.S. government and covers individual member deposits up to $250,000 at all federally insured credit unions.
Keep in mind that privately insured credit unions are not backed by the U.S. government. Before picking a credit union, you should identify how it’s insured.
Additional considerations when using a credit union
Credit unions have many advantages, but there are still some downsides to consider. Here are a few more things to think about before selecting a credit union for your banking needs.
Some credit unions may have a smaller geographic footprint. This might limit the number of branches available for your banking needs. But even if you don’t have access to a branch, most credit unions provide broad access to ATMs or offer fee reimbursements when using another financial institution’s machine. Some credit unions may even be a part of a credit union network that allows you to conduct your banking at other credit unions’ branches.
Credit unions often serve specific employers, geographic locations or groups such as churches, schools, labor unions or homeowners associations. Some credit unions offer their services to multiple groups or allow certain relatives of members to join. You can find credit unions in your areas here.
Lower fees and higher interest rates on savings are just a few of the advantages of working with a credit union. But before you leave your bank, make sure to research the credit unions in your area. Not all credit unions are the same. Compare rates, fees and location in order to select the best banking option for your financial needs.