Credit unions serve many of the same purposes and offer similar products as banks. But a credit union might be the right choice if you want to keep your money with a nonprofit organization that supports your community with unique benefits and financial support. Below are five benefits of joining a credit union.
1. Better rates on loans and savings accounts
Since banks must make money for their investors, they often charge higher fees than credit unions. Unlike for-profit banks, credit unions can give profits back to their members through higher interest rates on products like CDs and savings accounts. They sometimes even have fewer fees for typical banking products. 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.
2. Personal connection with the customers
Because a credit union’s customers are also its owners, these institutions tend to focus on customer service. Credit unions may go above and beyond to help their members reach financial success through personalized service. They provide easy-to-use services and real, live human beings who can answer questions quickly, make recommendations, and help you understand the complicated world of finance. Some credit unions also provide training and counseling to help members understand complex financial matters.
3. Credit for small businesses and borrowers in need
Credit unions tend to provide loans for the smallest businesses that might be overlooked or underserved by larger banks. As nonprofit organizations, credit unions also focus on providing loans to people in need. Many credit unions offer emergency loans of up to $5,000 or short-term cash advance/payday alternative loans of up to $2,000. Instead of going to a payday lender, many people get a better deal at a credit union.
4. Community involvement and voting rights
Credit unions have a specific mission to serve the communities. No matter what kind of neighborhood, city, or town people live in, credit unions intend to connect their local community with affordable financial services. 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 also vote on important decisions, including selecting credit union board members.
5. Support for diversity and inclusion
Because they are so community-oriented, with local relationships in communities that traditional banks might otherwise underserve, credit unions have a strong focus on support for diversity and inclusion. Credit unions have more than ten times more women serving as CEOs than banks. Credit unions are also more likely than banks to be Minority Depository Institutions (MDIs). 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.
Conclusion
Lower fees and higher interest rates on savings are just a few advantages of working with a credit union. While banks still have the upper hand regarding advanced technologies and the diversity of financial products they offer, credit unions can provide better interest rate options for both loans and deposits. In addition to financial education and counseling, credit unions often offer consumer loans, shared branches with other credit unions, electronic banking, ATMs, and more. Before you join any credit union, compare rates, fees, and locations to select the best banking option for your financial needs.
Key Takeaways
- Better rates on loans and savings accounts
- Personal connection with the customers
- Credit for small businesses and borrowers in need
- Community involvement and voting rights
- Support for diversity and inclusion
