As we grow in our ability to bring value to the marketplace, we earn more money. Knowing what our options are to handle that money is therefore an essential starting place. While we all know about the big banks, there is an alternative to be found in Credit Unions.
What is a Credit Union?
A credit union is a member owned financial institution, that operates similar to a bank. Historically credit unions have restricted membership on the basis of company worked for, geographical location, or any other criteria. In recent years however, membership requirements have been loosened, which provides many of us an alternative to the banks. In terms of product types offered, credit unions and banks are generally the same. There is one major distinction between banks and credit unions. Credit unions are not-for-profit entities. This leads to a myriad of benefits to using a credit union.
1. Lower Account Fees
Banks are for-profit companies, and as such they levy fees for the services they provide, in an effort to increase shareholder returns. Credit unions, on the other hand are not-for-profit, so the fees (if any at all) are lower. Without the need to drive shareholder returns, credit unions are only trying to cover operating expenses. This allows credit unions to charge significantly lower fees for services.
2. Lower Interest Rates on Debt
Similar to the above, without the drive for consistently increasing shareholder returns, credit unions are able to offer slightly lower fees on borrowings. A December 2018 report released by the American National Credit Union Association (NCUA) shows that credit union loans charged lower interest rates for a variety of products, including home equity loans, car loans, and shorter term mortgages. These lower interest rates could save you thousands of dollars, depending on your borrowing requirements.
3. Higher Interest Rates on Investments
While saving money on interest is good, on the flip side, credit unions also can offer higher interest rates for deposits. On the same report by the NCUA, certificate of deposits paid out higher interest rates for any time duration. This means that your extra cash can be put to work, making you more money.
4. Better Customer Service
Since credit unions are member owned, customer service is generally better than big banks. Members are able to vote on initiatives at the credit union, which leads to a bigger focus on customer service. Contrast this to a bank, which focuses on profits and often leads to cost cutting, especially in the area of customer service. If there’s one thing we can agree on, its when there’s an issue with your money, sitting on hold to reach an unresponsive call-center is not the ideal situation.
5. Expansive ATM Network
Credit unions typically have fewer brick-and-mortar locations, and even those are centered in a specific geographical area. To deal with this level of access, many credit unions enter into ATM agreements, allowing surcharge free access to an expansive ATM network. These agreements often result in thousands, or tens of thousands of no-fee ATMs spread across North America.
We work hard to earn our money, which means handling it well is important. Credit unions are becoming increasingly more accessible, and provide an alternative to traditional banking options. From higher interest rates on investments, to lower account fees or interest rates on borrowings, credit unions offer some distinct advantages for our financial well-being. Couple those financial advantages with excellent customer service and extensive ATM access, and credit unions might just make your financial life a little easier.