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If you are looking to switch banks or are looking for a new mortgage, car loan, savings account or other financial products, you may want to consider establishing a banking relationship with an organization that is not a bank at all: a fund.
Credit unions serve many of the same purposes and offer similar products as banks. But if you want to keep your money with a nonprofit organization that supports your community with special benefits and financial support, a credit union might be the right choice.
Take a closer look at what credit unions are, how they work, and why these organizations can be such a special place for your personal finances.
What is a Union Credit?
A credit union is a cooperative, not-for-profit financial institution owned by its members. Unlike banks, which are owned by shareholders and must distribute profits to their owners, credit unions are owned by their members, who are also their customers. More than 122 million Americans are members of credit unions.
Credit unions offer many of the same types of financial products and services as banks. However, a credit union may use slightly different names for its accounts and features, such as “share a draft accountinstead of “current account”. Since a credit union’s customers are member-owners, the credit union pays “dividends” instead of “interest”.
If you choose to keep your money with a federally insured credit union, you will also benefit from the equivalent of FDIC insurance for the credit union: the National Credit Union Administration (NCUA) provides federal insurance on up to $250,000 of eligible deposits per depositor, per insured credit union, for each category of account ownership, in the event of a credit union’s bankruptcy.
The bottom line is that credit unions are meant to serve as a safe place where people can save and borrow at reasonable rates. Due to their non-profit status and community-focused mission, credit unions can sometimes offer differences with banks and offer surprising benefits to their members.
Advantages of credit unions
Credit unions have a global mission to improve the financial well-being of their members and to serve their communities. There are several important benefits you can expect if you join a credit union.
Better rates on loans and savings accounts
Credit unions strive to provide reasonable rates to their members. Because they don’t have to pay profits to shareholders like banks do, credit unions can often pass that money on to their members, offering higher APYs on savings accounts and CDs and Lower APRs on loans. Credit unions offer some of the best checking accounts, high yield savings accountsand CD prices.
Great customer service
Credit unions tend to score higher than banks in customer satisfaction surveys. For example, consumer reports found that 96% of credit union members were “very satisfied” with their credit union. Since a credit union’s customers are also its owners, these institutions tend to focus heavily on providing customer service in a way that not all banks are inclined or able to match. .
Credit for small businesses and borrowers in need
Credit unions tend to lend to smaller businesses that might be overlooked or underserved by larger banks. If you are a small business owner or just want to support small businesses in your community, being a member of a credit union can help.
As non-profit organizations, credit unions also focus on providing loans to people in need. Many credit unions offer emergency loans up to $5,000 or short-term cash advances or alternative payday loans up to $2,000. Instead of going to a payday lendermany people can get a better deal from a credit union.
Community involvement
Nearly 50% of credit unions have a specific mission to serve low-income communities. No matter what type of neighborhood, city or town people live in, credit unions aim to connect their local community to affordable financial services. Credit unions help their members save $12.6 billion a year by offering lower fees and higher returns on deposit accounts, as well as $5.6 billion in savings on auto loans.
Credit unions can make a big difference in the financial lives of people who might otherwise be charged high fees. check cashing services, or pay higher interest rates on car loans they need to get to work. Simply by being present in the local banking markets of their communities, credit unions generate $4.9 billion in economic spinoffs annually.
Diversity and Inclusion Support
Perhaps because they are so community-focused, with local relationships in communities that might otherwise be underserved by traditional banks, credit unions place a strong emphasis on supporting diversity and ‘inclusion.
Compared to banks, credit unions have more than 10 times more women in CEO positions. Credit unions are also more likely than banks to be minority depository institutions (MDIs); there are more than three times as many credit union IMDs than bank IMDs.
Many companies say how much they care about diversity and inclusion. Credit unions incorporate it into their daily work by meeting the financial needs of diverse communities.
How to Join a Credit Union
Credit unions may have limits on who can qualify for membership. For example, some credit unions serve the military community, and you can only join if you are an active duty military member, veteran, certain other government employees or contractors, or their family members. Other credit unions may have a membership scope based on a particular employer, university, union, or geographic area.
While some credit unions are limited to certain employers, types of workers, or geographic areas, in general, a number of credit unions are open to all members and will be happy to accommodate you. Some credit unions are digital first and have a nationwide membership base. No matter where you live or work, you may be able to join a national credit union and get access to their rates on loans, CDs, and savings accounts.
As part of the process of joining a credit union, you may have to pay a fee or make a donation, usually in the range of $5 to $25, which is the cost of buying a ownership share in the credit union. You can join a credit union by visiting a branch in person or by opening a new account online.
Credit unions versus banks
After seeing the benefits of a credit union, you might wonder why anyone would choose to put their money in a bank. It is true that credit unions have valuable benefits and attractive offers. There are complex reasons why people choose their banking relationship. Some banks may offer a full range of financial products, plus desirable mobile banking app featuressimplified international banking or better digital banking tools.
Depending on what you need from your banking relationship and day-to-day financial management, keeping your money in a credit union can help you save on fees, get a higher return on your savings, get a better rate on a loan and improve your financial well-being, while supporting an organization that makes a special contribution to the economic empowerment of your community.
If that all sounds like a good deal, then a credit union may be right for you.
Frequently Asked Questions (FAQs)
What is a shared account project?
A share a draft account is a credit union checking account. It works the same way as a bank checking account, but you as a member of a credit union may be more likely to earn dividends (i.e. interest) with a checking account. deals in shares than with a current bank account.
What financial benefit do members receive as part of their Caisse membership?
According to the June 2021 Member Benefits Report of the Credit Union National Association (CUNA), the direct annual financial benefits of credit union membership were $109 per single member or $229 per household. member. The more you use your credit union for additional products and services, the more benefits you will receive.
For example, the report also found that by getting a car loan from a credit union for a new car for $25,000 for 60 months, members would save an average of $199 a year in interest, or about $1,000. savings over five years, compared to a typical bank auto loan.
What are other examples of how credit unions support their communities?
Credit unions offer community involvement and financial support in several important ways beyond their day-to-day operations, such as providing financial education, small business loans, and home loans to low-income borrowers. For example, more than half of credit union home loans go to people with middle or lower incomes.
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