What are the benefits of credit unions?
If you are looking to borrow money, it might be worth considering joining a credit union. There are many benefits to credit union membership and members can benefit from more favourable loan conditions, cheaper fees and being directly involved in the policy-making that affects them.
What is a credit union?
A credit union is member-owned meaning that all members of a credit union are also owners and are involved in the decision making of the union. They are a type of financial institution but, unlike a bank, they are a non-for-profit organisation. This means that any profit made will be given back to credit union members by offering lower fees, lower interest and higher savings rates.
In a credit union, there is a community spirit in that your savings or checking account are actually helping to contribute to other member’s mortgages or loans. By putting money into a credit union, you are not only helping to secure funds for yourself but also for the rest of the union members. They are often thought of as a type of financial cooperative. Due to the non-for-profit nature of credit unions, these institutions often focus on a more personalised approach and better customer service.
What are the key benefits of credit unions?
Being part of a credit union comes with many different benefits. Here are some of the main reasons that people choose to join a credit union.
Personalisation of service
With banks and traditional lending institutions, it can be easy to feel like just a number. Even banks with better-than-average customer service will treat you as a client and, ultimately, their goal will be to make a profit. Credit unions, on the other hand, offer a personalised level of service.
Credit unions tend to go the extra mile to help their members reach their financial objectives. Rather than make a profit, credit unions use their money and resources to directly assist their members, whatever their needs. Some credit unions go one step further, offering counseling and specialist training to help their members better understand their finances.
Better rates and fees
Because credit unions are not-for-profit organisations, unlike banks, the profit is given back to their members in the form of more favourable rates and fees. For example, many people choose to open savings accounts with a credit union because they offer higher interest rates meaning that you are able to build interest on your savings faster.
In addition to more interest, credit unions typically offer fewer fees and any fees tend to be lower than those of banks or other financial institutions.
When it comes to loan rates, borrowing from a credit union also works out as far cheaper than it would be borrowing from a bank. The APR tends to be lower for credit unions, especially compared to short-term lending such as payday loans.
Community focus and ownership
One of the main benefits of being part of a credit union is that you become part of a community. Members also become owners of the credit union meaning they are able to be directly involved in policy making and have a say in how the finances of the union are being used.
On top of that, credit unions are usually set up based on a commonality, be it location, sector or shared hobby. For this reason, credit union members often have similar interests and form meaningful relationships with other members.
Members tend to enjoy being a part of a financial institution where the focus is on the consumer and how to achieve the financial goals of the specific members.
This benefit also extends to ownership. When you become a member of a credit union, you automatically become a co-owner. As such, you get a say in important decision making such as the selection of credit union board members.
Range of services and products
It could be assumed that because credit unions are smaller institutions than traditional banks, that there are fewer services; however, that is not always the case. As well as education, training and counselling, many credit unions also offer a range of financial services such as ATMs, electronic banking and shared branches , all of which are designed to make credit unions more convenient for the consumer.
Also, like any other financial institution, credit unions offer a wide range of different financial products including consumer loans, home equity loans, mortgage loans, car loans, member business loans and credit cards.
Protected transactions
Just because credit unions are smaller financial institutions than banks, does not mean that they are any less safe. In fact, all federal credit unions (and some state credit unions) are insured by the National Credit Union Administration via the National Credit Union Share Insurance Fund (backed by the US government). Other credit unions, such as state-chartered credit unions, are privately insured.
Thanks to this insurance, individual member deposits of up to $250,000 are covered meaning that your accounts are protected.
