When Should You Choose A Credit Union
Here are a few of the best reasons to join a credit union:
- It has the right account or loan for you. You can try out a credit union without moving all your accounts at once. Credit unions are a great resource for low-cost home and auto loans, and many will work with you to qualify if you’re just starting out. Some credit unions also offer a carbuying service that works in tandem with their auto loan programs. Credit unions usually have good deals on checking and savings accounts as well.
- They offer financial education or special programs you can use. Financial education is part of the credit union mission. Some offer workshops on skills like budgeting or buying a home. Credit unions that serve employee groups may provide specialized helpfor example, retirement advice for government workers with pensions.
- You’re willing to shop for the right digital tools. It’s increasingly possible to find a credit union with an excellent online and mobile experience, but you may have to seek it out.
Ways Credit Unions Are Better Than Banks
Are credit unions or banks a better option for you? At Bellco Federal Credit Union, weve identified 7 ways that we believe make credit unions a great choice!
Originally known as the Bell Telephone Credit Union, Bellco FCU opened its doors in 1938 and continues to provide unique financial products and services to individuals and small businesses in Berks County.
The most significant difference between banks and credit unions is that banks are in business to generate the highest profits for their shareholders, while credit unions are not-for-profit institutions that focus on meeting the financial needs of their members.
Like banks, credit unions accept deposits, make loans, and provide a wide variety of other financial services. But as member-owned and cooperative institutions, we provide a safe place to save and borrow at reasonable rates with exceptional customer service.
The Credit Union Difference
Choosing a credit union over a bank is one of the smartest financial decisions one can make. On average, credit unions are able to offer better rates and lower fees than any bank. This is because all credit union profits are passed directly back to their members. What that means for a member of Premier Members CU is higher rates on savings and certificates and much lower rates on loans! In addition to that immediate impact to your personal financial bottom line, there are many other benefits to doing your banking with a credit union.
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More Cash Back Yes Please
Unlike banks, members typically receive a portion of their credit unions profits. After all, members are owners of the credit union, so its only fair that they share in its success. Credit unions return profits to their members by giving back through lower loan rates, rewards programs, annual dividends, financial education programs and more! Take a peek inside: Between 2018 and 2020, Desert Financial gave back a total of $39 million in annual cash bonuses to its members, in addition to the other rewards and benefits of membership.
Branch And Atm Access
Most credit unions and many banks have physical branches where customers can make deposits, get cash, speak with loan officers, and conduct other financial business in person. Virtually all credit unions and banks also have their own branded ATMs or belong to low-fee or free ATM networks.
Banks Branch and ATM Networks
Banks branch networks come in all shapes and sizes. National and multinational giants like Bank of America and JPMorgan Chase have thousands of locations littered about the country, while single-branch community banks might serve a single small town or handful of rural communities. That said, more traditional banks have regional, superregional, or national branch networks than credit unions.
Most banks also belong to national ATM networks that include thousands or tens of thousands of in-network ATMs that charge few if any fees for cash withdrawals and other basic financial transactions. These networks may be entirely in-house for example, Chase Bank has thousands of branded ATMs scattered about the United States or shared by many different banks, like the Allpoint or MoneyPass networks. Most branchless banks belong to one of the major fee-free ATM networks.
Even larger credit unions that accept members nationwide tend to have smaller physical footprints, either in contiguous geographies or clustered in areas where lots of members live and work.
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Benefits For The Credit Union Member
A credit union is ultimately established for the benefit of members and owners, rather than stockholders. Instead of receiving dividends or a higher-priced shares of stock in the financial institution, members are granted access to higher interest rates for savings accounts and lower interest rates for loans in many cases. Lets take a closer look at the numbers.
How To Find A Credit Union
Membership at credit unions generally isn’t open to the public.
To join, you must meet certain criteria or be affiliated with a particular employer, group or organization.
Some credit unions also welcome immediate family members of existing account holders with open arms.
You can locate a comprehensive listing of credit unions by state using the online directory found on MyCreditUnion.gov.
Once you’ve narrowed down your list, evaluate the following factors before making a final selection:
- Opening deposit: This amount should be between $5 and $25, according to MyCreditUnion.gov.
- Convenience: Is the nearest branch located within close proximity of your home or place of employment?
- Products: Most credit unions offer the same financial products as big banks, but some are private and operate on a significantly smaller scale.
- Rate of Return: The higher the rate of return, the better.
- Community Involvement: Do the staff really seem to have the best interests of the members at heart or are they operating similar to a for-profit financial institution?
You may have to schedule appointments at each of the branches to answer these questions, but doing so will ensure you select the credit union that best suits your financial needs.
Are you affiliated with a credit union?
If so, do you prefer their services over big banks?
Please share your thoughts in the comments below.
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The Interest It Offers
Because credit unions serve their members and not their investors, they can offer higher interest rates on savings accounts and lower rates on mortgages. Meanwhile, for-profit banks set lower interest rates on savings and higher interest for mortgages. That means more money in the silk-lined pockets of their fancy Italian suits.
But theres a new kid in town. Online banks and neobanks are becoming more popular by the day. Because these banks dont have to worry about the upkeep of a building or a parking lot, they can charge lower fees and give you better interest rates on your savings.
Keep in mind that local banks and credit unions are unique, so they might offer special deals from time to time. Do a little research to see what theyre promoting before you choose one. But dont join because you want a free t-shirt. If youre not careful, that freebie could cost you hundreds of dollars in fees later on. No T-shirt is worth that much.
Why Credit Unions Are Better Than Banks
Many of us have had more than our fill with the banks. High and frequent fees, the lack of a personal relationship, and difficulty getting loans are hardly uncommon with banks. Thats true even if youve been a customer of a bank for many years. But there is salvation out there, and you can find it at a local credit union. Simply put, credit unions are better than banks in almost every category.
Unlike banks, credit unions are actually financial cooperatives, that are owned by their customers, who are referred to as members. That classification results in a better banking relationship.
Here are the primary reasons why I?ve found credit unions to the superior banks.
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Major Interest Rate Differences Between Credit Unions And Banks
A few times each year, the National Credit Union Association publishes a comparison between credit unions and banks as it relates to interest charged on popular deposit and lending products. As of , some notable aspects of the most recent report include the following products:
- 5-year certificate of deposit : 0.78% APY from credit unions versus 0.60% APY from banks
- Money market account : 0.13% from credit unions versus 0.09% from banks
- Home equity loan, 5 year, 80%: 4.16% from credit unions versus 4.70% from banks
- 48-month used car loan: 2.84% from credit unions versus 5.03% from banks
In some cases the differences may seem small, but they certainly can add up over time. This is particularly true when comparing lending products between credit unions and banks. Because of their non-profit status and member-focused missions, credit unions are far more likely to have stronger rate offerings on all products compared to similar banks.
Joining A Credit Union Is Difficult
This myth persists because many credit unions were first chartered to serve the needs of specific groups of people, such as steelworkers, the alumni of a certain educational institution, or members of the military. While there are still some credit unions that maintain strict eligibility requirementsincluding military credit unionsmost now exist to serve their community. For example, Spero Financial Federal Credit Union was founded to serve employees of Southern Bell Telephone & Telegraph Company, but we now serve over 60,000 members and admit anyone who lives within the communities that our branches serve or who works for one of over 400 select employee groups.
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You Never Hear About A Credit Union Going Under
Actually, credit unions do go under! But when they do, it rarely makes for front-page news. Part of the reason is that credit union failures are infrequent. But perhaps more significant is that credit unions are much smaller than banks, and more typically limited to operations in a single state. In addition, credit union failures are typically not tied to large speculative commercial loans the way bank failures are.
There are more than 7,000 credit unions in the US. In 2015, a total of 11 credit unions were shut down by the National Credit Union Administration , compared with eight banks that were shut down by the FDIC in the same year.
But more telling, 15 credit unions were closed down in 2009, the peak year of the financial meltdown. In that same year, 140 banks were shut down. Its clear that when the stress on the financial system is greater, credit unions are the safer place for your money.
In the event that a credit union does close down, the NCUA, a branch of the US Government, performs much the same function as the FDIC does for banks. Its purpose is to Provide, through regulation and supervision, a safe and sound credit union system, which promotes confidence in the national system of cooperative credit protect consumer rights and member deposits.
Through its National Credit Union Share Insurance Fund, credit union depositors are insured up to $250,000 per depositor.
How Do I Choose A Credit Union
To choose a credit union, youll want to ask yourself a few questions:
- Do I meet the credit union membership requirements?
- Does it have branches or ATMs near me?
- Does it have the account types or other products I need?
- What kinds of fees does it charge?
Basically, you should ask yourself the same things you would when choosing a bank for your business.
Disclaimer
At Business.org, our research is meant to offer general product and service recommendations. We don’t guarantee that our suggestions will work best for each individual or business, so consider your unique needs when choosing products and services.
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What Is A Bank
Banks are for-profits owned by stockholders or investors. You might be asking yourself what this means if youre a bank customer. Its simple: any profits made by a bank are used to pay out dividends to stockholders, which means that you dont directly benefit from being a bank customer unless you own shares of the company.
Disadvantages Of Credit Unions
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What Kind Of Accounts Can You Hold At A Credit Union
Pretty much the same as a bank: chequing and savings accounts, mortgages, loans and credit products, and investment and retirement products. Depending on which bank and credit union you compare, latter may charge lower banking fees and offer higher interest rates on savings. Members can also use their bank card at any credit union ATM within The Exchange Network free of charge. The tradeoff, however, is that credit unions offer fewer account types and financial products than the big banks.
Getting A Mortgage With A Credit Union Vs A Bank
Your local credit union offers mortgages to homebuyers just like a regular bank and should have a range of mortgage terms as well as fixed and variable rate mortgages. Once again, credit unions, due to their not-for-profit organizational structure, tend to offer slightly more competitive products, and this is true of mortgage rates as well. While credit unions may have better mortgage rates than banks, there can be downsides to a mortgage with a credit union. For example, credit unions may not have as flexible prepayment terms as the banks. Make sure to get clarification before signing on the dotted line.
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Interest Rates Account Yields And Account Fees
Its worth drilling down a bit more on what bank and credit union customers can expect to pay or receive, respectively, on credit and deposit balances. Credit costs and account yields vary subtly but noticeably by institution type, although its also true that prevailing benchmark rates and applicant are far more important determinants of borrowing costs.
Bank Interest Rates, Account Yields, and Account Fees
Banks are for-profit institutions that answer first to their shareholders, not their customers. Unfortunately, this often manifests in higher interest rates on loans, relative both to credit unions and direct lenders, and higher account fees than credit unions. Its not impossible to find free checking accounts at big banks, but customers often have to jump through hoops like minimum balance, monthly direct deposit, or transaction requirements or hold substantial assets across multiple accounts to avoid monthly service fees.
Likewise, traditional banks often pay lower interest rates on savings accounts than credit unions. Big-bank savings accounts have particularly low yields that make them more-or-less useless in the eternal fight against inflation.
As nonprofit, member-owned institutions, credit unions arent as focused on the bottom line as for-profit banks. This enables them to charge lower rates on credit products and levy fewer account fees relative to banks.
Choosing A Credit Union
There are many different credit unions out there most will offer the same sorts of products, and most will offer about the same rates. The best way to secure a loan, whether it is for a new home, new car, or student loan, or to find the best savings or checking accounts, involves shopping around. You can then judge based on the interest rates, as well as the customer service that you receive.
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At The Bank Im A Customer At The Credit Union Im A Member
The difference between customer and member is more than just semantics. Since most banks are stockholder owned, I can be no better than a customer to a bank unless Im a major stockholder in the company. By contrast, credit unions are owned by their members, so Im not just a customer, but an owner. You can feel the difference when doing business with either a bank or a credit union.
As a customer, the bank sees me primarily as a interest and fee income to the bank. Theyre interested in keeping me happy to the degree that they can extract that income from me. But they have no personal stake in improving my financial situation, unless of course that improvement coincides with their efforts to extract said fee income. But it casts me squarely in the camp of being an outsider within the organizational structure of the institution.
My member status at the credit union affords me automatic special handling. Employees not only want to help me achieve my goals, but also to do it in the most cost effective way possible. Customer retention is at a premium with credit unions, which makes superior business sense. Even if youre only using credit for free checking, eventually you will have other needs, such as a credit card, auto loan, or mortgage.
Membership Requirements And Account Availability
As you decide between a credit union and a traditional bank, the institutions respective membership requirements or lack thereof will be among the first points of distinction you notice.
Membership Requirements and Account Availability at Banks
Banks tend to be more open to new customers than credit unions. To the extent that banks restrict membership or account availability at all, its on the basis of geography that is, community banks or regional banks may not accept applications from would-be customers in states where they dont have a physical presence.
Otherwise, individuals and couples with Social Security numbers or taxpayer identification numbers and U.S. addresses can generally apply for deposit accounts without restriction.
Membership Requirements and Account Availability at Credit Unions
Historically, credit unions restricted membership in fairly drastic ways. For example, some were open only to employees of particular companies or members of particular labor unions, while others accepted members only from very narrow geographical areas.
While some smaller credit unions continue to restrict membership, many larger ones now have gaping loopholes in their membership criteria that allow basically anyone to join. For example, Andrews Federal Credit Union, which has about 120,000 members and a branch network serving the mid-Atlantic states, only asks that prospective members join the American Consumer Council and pay the organizations nominal membership fee.
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