24 May, 2013
As bank fees keep rising, and banks are making more profit than they ever have in the past, an increasing amount of people are turning to alternative financial institutions. Credit unions are one such institution that can help people save money. They offer many financial products and services that can maximize the incomes and increase the savings of many people, and they usually come with a much lower fee than traditional banks.
Both credit unions and traditional banks offer financial services to customers, and both give consumers access to a checking or savings account, as well as CDs, credit cards, and loan services. However, credit unions differ from traditional banks in two very distinct ways. First off, credit unions are a not-for-profit institution, which allows them to offer a higher interest rate on their savings accounts and CDs, and a lower interest rate on credit cards and loan services. Secondly, credit unions are cooperatives, meaning that they are member-focused institutions that are owned and operated by their own members, unlike traditional banks that are owned by stockholders.
Credit unions often have membership requirements that have to be met to join, these can be anywhere from having to be an employee of a corporation to having to be a teacher from a specific school district. Here are five advantages for using a credit union instead of a traditional bank.
Better Rates than Traditional Banks
Credit unions give you a larger financial gain than traditional banks. They usually offer higher interest rates on any type of deposit account, including money markets, savings, and checking accounts. These rates can be anywhere from 4 to 10 times more than the interest amount you would receive at a local bank. Credit unions also offer the same financial services as banks, but at a much cheaper price. Loan and credit card rates are generally much lower at a credit union, including APRs on mortgages and personal loans.
Compared to traditional banks, credit unions have many fewer fees. Many credit unions in fact offer withdrawals, checks, and electronic transactions for free, as well as checking accounts with no required minimum balance and no monthly service charge. This saves people hundreds of dollars a year, and although credit unions are similar to traditional banks in that they charge for bounced checks and over drafting, the amount is usually a lot less.
The goal of a traditional bank is to make as large of a profit as possible, which often comes at the expense of the customer who cannot enjoy low rates or fees, and may feel gapped out of customer service quality. This is because in order to provide these services, traditional banks would have to cut into their profits, which they don’t tend to do. Credit unions on the other hand have a unique membership structure that allows all their members to have a vote in the decisions that they make to better serve one another. This means that credit union’s member benefits aren’t at odds with the management, and so credit unions have a higher incentive to provide the lowest rates and fees possible, as well as excellent customer service.
Because credit unions generally have small branches, they offer much faster and more personal service than a traditional bank. It is often the case that credit unions will assign a single person to work with you every time you visit a branch. This allows you to develop a relationship with your banker, and receive personalized service.
If you have a bad credit score, are not employed, or don’t have enough money for a large deposit, most traditional banks will not think twice to deny you a credit card or loan. Credit unions on the other hand are more willing to work with you and your personal financial situation, even if your financial past isn’t superb. A credit union is also known to give leeway to their existing members who are already in good standing, but have come into some unexpected financial issues.