Many of us may have heard about credit unions but are not entirely sure what they are or what they do.
What are Credit Unions?
Credit unions are financial institutions offering a variety of services and owned by their members unlike banks. Credit unions provide a range of services such as electronic banking, current and saving accounts, loans and free use of ATM machines.
The Credit Union National Association estimates that more than 96 million Americans use credit unions.
How to Join a Credit Union
The good news is that most Americans are eligible in joining a credit union. Membership in a credit union is possible if you belong to a particular region, workplace, community or church. A little investigation is needed in joining a credit union in your community. Your employer, family member’s employer or local government can help you find a suitable one for you. The website also has great information on joining a credit union. You can start with sites such as mycreditunion.gov.
Credit unions are smaller in size compared to banks. Experts estimate that banks hold around $14.45 trillion in assets compared to $1.03 trillion held by credit unions. However, joining a credit union has more benefits than you may think:
- Credit unions provide a superior service. As credit unions are owned by members, there objective is to provide affordable financial services to their members, unlike banks whose main mission is to make profit. This always leads to very satisfied customers as recent surveys have revealed.
- Higher rates on savings and lower interest rates. Joining a credit union which has a not-for-profit status guarantees higher rates on saving accounts and lower rates on loans and credit cards as savings are passed on to members. Experts have reported that as an example, if you take a five-year loan to buy a new car at banks, the average interest rate is around 5.19 percent compared with the credit unions 2.87 percent. Although both banks and credit unions have low rates on savings accounts, credit unions typically offer higher rates of around 0.83 per cent on a regular savings account as compared to 0.55 percent at banks.
- No minimum balance on credit union accounts. While many banks force their customers to adhere to higher minimum balance requirements on their accounts, around 72 percent of credit union customers surveyed in 2012 had no minimum balance requirements to avoid being charged.
- Lower fees than what most banks charge. Many credit unions aim to keep costs down for their members. This is because they have some level of flexibility in how much they charge customers, made possible through eliminating products or services to cut costs as opposed to adding fees. Customers end up saving a lot of money as a result.
- Easy ATM access. It is not just banks that bring ATM machines or branches near customers. Joining a credit union gives you the same convenience as branches and ATMs are shared by credit unions to offer customers easy access to their cash. This has been possible through the CO-OP ATM network and a shared branch alliance.
- Joining a credit union gives you access to financial literacy which helps you make smart financial decisions. Many credit unions offer customers information, sometimes through seminars and their websites, on topics such as how to manage credit cards and how customers can keep themselves safe from identity theft.
- Insured deposits. Joining a credit union guarantees that your deposits are insured if the credit union folds just as bank deposits are. This is because credit unions are not immune to folding. However, many credit unions that fold mostly merge with other credit unions. Credit union deposits of up to $250,000 are insured by the federal National Credit Union Administration (NCUA), the same agency that provides protection that the Federal Deposit Insurance Corporation applies to banks. This means that if a credit union fails, its members receive their deposits within three days.
Consider Joining a Credit Union
Joining a credit union could be a smarter financial decision for you. The lower fees, lower charges, lower interest rates, and the higher rates on savings are a sure way of saving you a lot of money.
Although credit unions are smaller in size as compared to banks, their not-for-profit mission puts you, the customer first when it comes to benefiting from profits and reduced costs. Finally, when it comes to failing, reports suggest that since the start of the economic downturn in 2008 up until 2012, four times as many banks (465) have failed as compared to credit unions (124). Statistics for 2012 also report that around 51 banks failed compared to 21 credit unions.
If your mission is saving your hard earned cash, joining a credit union could be the answer for you.