Credit unions sometimes have a reputation as the limited cousins to banks, but that’s not even close to the truth. In 2021, the National Credit Union Association (NCUA) listed roughly 5,100 credit unions in the United States, and that number continues to grow.
With that said, many people are conditioned to only look at banks for their financial institution needs, and that is mostly due to a lack of knowledge. Credit unions are not-for-profit organizations formed to serve their members, who in turn vote for a volunteer board of directors that sets the course of the institution. As with banks, credit unions take deposits, provide loans, and offer a variety of other financial services. Personal membership is through participation in companies, organizations, and in some cases simply by being part of a geographic location. Additionally, membership is often transferrable to other family members regardless of whether they also meet the original membership criteria.
Below are 3 reasons to consider a credit union:
- Focus on member service and financial literacy
- Strong financial management features and benefits
- Greater community focus
Member Service
Whereas banks are the traditional choice for financial management, today, credit unions are a significant rival for these services. One way that they work to give great service is to offer access to local in-person seminars and a variety of topical information like preventing identity theft and managing credit. The websites of credit unions contain pre-recorded webinars, articles, financial tools, and other resources for educating their members. Banks often are more interested in using these items as sales-driving tools, though, where credit unions are focused on things that drive smarter financial choices, managing money online, and getting member questions answered.
Many credit unions now also have modern and full-featured mobile apps, reciprocal agreements with thousands of ATMs around the country and abroad, automatic check deposits, and other features traditionally expected of today’s banks.
Strong Features
On average, credit unions offer lower rates on loans and higher rates on savings accounts. Being a non-profit means that dividends stay within the organization and are returned to members in the form of quality savings and loan rates – a feature that banks often can’t match.
The National Credit Union Administration reported in December 2018, that five-year loans for new cars at banks had an average interest rate of 5.04 percent, compared with 3.57 percent for credit unions. Certainly, the upheaval in the financial industry in 2022 has changed this by rates growing considerably, but the general idea that credit unions have more competitive interest still stands. Similarly, with the non-profit setup, credit unions also tend to offer lower fees, like specialty transactions and overdraft fees.
Community is Key
Because credit unions are member-driven and the clientele is generally focused on a certain industry or region, the community plays a large part in their overall plans. The need is for building up and educating the community in financial matters. This includes targeting loans to individuals and small businesses to keep the assets committed locally and aid members and the greater area at large.
In addition, because members often have shared interests and goals, they appreciate participating in an institution that is designed for and works to help other members like themselves. Everyone in the organization is given an equal voice in the management of the union and can work together to provide what is most needed for the community.
In short, if you’re looking for a new or additional financial services provider, you should give credit unions a look. They do nearly everything banks do, but with their strategy on the members instead of shareholders, you just might be surprised at how different banking experiences become.