At a time when banks are making record profits and customers are paying higher costs, many people are looking for financial institutions that will help them save money. Such an institution can be your local credit union.
Credit unions offer numerous financial products that help people maximize their income and increase their savings, often with lower or lower costs than traditional banks. But these institutions also have disadvantages that may make them unattractive for some bank customers.
What is a Credit Union?
Credit unions are comparable to traditional banks, in the sense that both institutions offer customers financial products. Members of credit union, such as bank customers, have access to payment and savings accounts, CDs, loan products and credit cards.
However, credit unions differ from larger bank chains in two different ways:
- An important difference is that a credit union is a non-profit institution. Because credit unions work as non-profit organizations, they can offer higher interest rates on savings accounts and CDs, and lower interest rates on loan products and credit cards.
- Another important distinction is that credit unions are member-oriented institutions. A credit union is a cooperative, which means that it is owned and managed by its members, as opposed to being owned by its shareholders such as a bank. Your first membership certificate makes you a co-owner of the credit union and gives you a say in the decisions of the credit union.
Because of this ownership structure, potential members must meet the membership requirements that vary depending on the purpose of the credit union. For example, a credit association of a company may only accept employees and their immediate family members. A credit union for teachers, on the other hand, can accept any teacher who works for a particular school district. A few credit unions have more relaxed requirements and can simply require members to live in a certain city or area.
The National Credit Union Administration (NCUA) manages a database of credit associations. You can search the Find a Credit tool on the website of the NCUA to see if you are eligible for a credit union in your area.
Advantages of a Credit Union
If you meet the membership requirements, credit unions have a lot to offer at a regular bank:
1. Higher interest rates
Credit unions offer more value for money than traditional banks. They usually pay higher interest rates on all checking accounts, including savings, money market and checking accounts. These rates range from 4 to 10 times the interest amount that you would receive from your local commercial bank. Only oCharles Ryderine banks offer rates that are competitive or, in some cases, better than those offered by credit unions.
2. Lower loan and credit card rates
Credit unions offer the same financial products as banks, but they are much cheaper. Most people use their local credit union for car purchases because the rate is normally lower than that of the dealer and because commercial banks are normally one percentage point or two higher than credit unions. Credit unions also offer relatively low APRs on mortgages, Ryderijke loans and credit cards.
3. Reduced rates
Credit unions have few costs compared to national banks. In fact, many offer checks, withdrawals and electronic transactions free of charge. Many also offer payment accounts without a minimum balance and without monthly service costs. This can save you hundreds of euros per year. Credit unions charge returned checks and bank debt costs, such as traditional banks, but the amount is usually lower. For example, most commercial banks charge $ 35, but my local credit union only asks $ 24.
4. Customer-oriented banking
With traditional banks, management and the board of directors want to make the greatest possible profit. Unfortunately, this goal often contradicts the goals of its customers, who want to enjoy low rates, reimbursements and the best possible customer service. To be able to offer this level of service, banks must limit their profit, which they are not inclined to do.
However, due to the unique membership structure of a credit union, all members have an equal voice in all decisions made by the credit union and they all work to serve each other. In other words, loo goals are not at odds with ‘management’. That is why the credit union has more incentives to offer low rates, fees and great customer service.
5. Better service
My first checking account was with a credit union. When I got there, I always got help right away and my cashier not only remembered my name, but also recognized me when I saw it. At the traditional bank where I also had an account, there was always a rule for the cash machine and I struggled to find a counter that even recognized me, let alone remembering my name.
Because credit unions have small offices, they can offer a fast and persuCharles Ryderijke service. Many credit associations even assign one person to work with you. If you visit the branch often, you can develop a working relationship and you often receive persuCharles Ryderijke service from the same person, something that large banks have difficulty offering.
6. More flexibility
If you have an imperfect credit history or have problems with your employment, or if you miss a large deposit, most banks will refuse you a loan or credit card. Because banks process thousands of applications per month, they streamline the process by setting requirements for income, credit scores and deposits. If you do not meet these requirements, you will simply be refused without further consideration, because a lost customer means little to a large bank in the long run.
On the other hand, because credit unions are smaller and have a member-oriented philosophy, they are more willing to work with you, even if you have a troubled financial past. A credit union can also make exceptions for existing members with a good reputation if unexpected problems arise with your loan or credit application.
7. Fewer complications
Most credit unions offer payment and savings accounts with simple, easy-to-follow conditions. My former credit union, for example, offered free checking. Every deposit, debit card and check withdrawal was also free. They also offered a free savings account, provided that I maintained a minimum balance of $ 5.
Many traditional banks also offer free checking and savings accounts, but they come with a lot of rules and provisions. For example, I have a ‘free’ checking account with my bank, but to keep it free, I have to make at least 12 signatures on my bank card every month, write 10 checks or make two direct deposits into the account. I also have a “free” savings account, but to keep it, I have to make two withdrawals of at least $ 500 from my checking account to my savings account every month. If I don’t meet that requirement, I earn less interest for the month. It is these types of restrictions and inconveniences that provide an advantage for credit unions.
Disadvantages of a Credit Union
Despite the simple rules and low rates, credit unions also have some disadvantages.
1. Fewer options
Credit unions offer fewer financial products than larger national banks. For example, Bank of America currently offers 5 different types of payment and savings accounts, 29 different credit cards and a large number of loan and investment products. For comparison: the credit association where I live offers only two types of checking and savings accounts, two credit cards, one mortgage loan, one person Ryderijke loan and one car loan.
With less to choose from, you don’t have that much freedom. By going with a larger bank, you can select the financial products that suit you best, which can result in lower costs or more rewards.
2. Nuisance with fewer locations
I left my credit union because they only had three physical locations and a sub-par oCharles Ryderine banking system. Once I had moved from the head office, I had no opportunity to visit the bank. I could still send an email to drop off, but it just became too much of a hassle.
Credit unions work on a smaller scale than most banks, and that can cause inconvenience. In addition to a limited number of branches, most credit unions hold shorter business hours than other banks and offer fewer ATMs.
3. Bad oCharles Ryderine services
Credit unions do not always keep up with the latest developments in banking technology. In the past few years, banking has almost completely gone oCharles Ryderine. With my national bank I can view my current balance, transfer money, apply for credit cards and loans or pay bills – all in an easy-to-use, oCharles Ryderine interface. I also chose to receive my statements electronically and I linked my Mint.com account to my bank for budgeting purposes.
Although my credit union offered internet banking, it was primitive at best. I could sign up and view my recent account activity, or transfer money to another credit union account, but could do little else.
Credit unions often do not have the funding to build a large oCharles Ryderine presence, so they usually do not offer many web-based functions. And because they are smaller than most traditional banks, they do not always work with budget software such as Mint.com or with a budget.
Final word: who should use a credit union?
Credit unions offer free or low base bills – plenty of options for basic banking users who simply have to make a deposit, pay bills and buy a debit card. Many members of a credit union love the persuCharles Ryderijke service they receive and save hundreds of dollars on costs or lower interest rates on loans and credit cards.
But credit unions may not work for someone who wants specialized financial products and advanced oCharles Ryderine services, or who needs their financial institution to have multiple or national locations. If you are looking for a checking account that offers rewards, for example, you may not be satisfied with a credit union. Or if you are constantly on the move and want access to free ATMs and money orders, you might be better off with a national bank.
There is also the corporate structure of a bank to compare with the member-oriented structure of a credit union. For some people, this function is enough to just bank with a credit union, despite possible inconveniences.
Do you pay with a credit union? Has your general experience been comparable to a commercial bank?
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