Many people have mistaken beliefs about credit unions that prevent them from recognizing the many significant potential benefits of credit unions to them. While people may try to compare credit unions to payday lenders or elite investing clubs, for example, the truth is that credit unions are like neither of these. Instead, they are more like banks in offering a range of savings and checking account options and loan and investment products, yet they're entirely unlike banks in almost all other ways.
Because of how they're structured and who they serve, credit unions offer many unique and appealing benefits to account-holders. The following are just eight of the top benefits of credit unions over banks and other financial institutions where you could keep your money.
1. Cooperativeness, or Member vs. Customer
Banks and most other financial institutions have customers. Credit unions, on the other hand, have members. That's because, while banks are corporations, credit unions are non-profit cooperatives. Everyone who gets an account at a credit union is considered a member of that cooperative. That means, as a member of a credit union, you are considered a part-owner of that credit union literally.
As you read through this list further, you'll see several ways this can come into play to your advantage. For now, the key to know is that, whereas the goal of a bank is to make money for its investors (which are not necessarily the same as its customers,) the goal of a credit union is to serve its community, whether that community be geographical, vocational or social. This means that all the money a credit union earns from its investments is poured back into its community of members.
2. Personableness, or The Human Factor
As you might expect, credit unions are more personable than banks, which tend to feel, and be, more corporate in nature. It is unlikely the staff of a bank will greet you by name when you visit to transact business, but a credit union staff very likely will. That's because credit unions are community-based, whatever that community may be.
At a credit union, you are unlikely to face staff unable, unwilling or unauthorized to help you or to simply get lost in the faceless bureaucracy because the whole purpose of the credit union is not to serve someone else's goals (i.e. the investors) but yours (i.e. a member of the credit union's community.)
At a credit union, you are more likely to see the same faces from day-to-day helping you with all your banking, loan, and investment needs.
That means every time you go to the credit union for a different purpose, the people helping you will already be familiar with you and your financial info. You will not likely need to reintroduce yourself to a new person each time who has no prior relationship or history with you and no understanding of your situation or your needs. For these reasons and doubtlessly many more, the American Customer Service Index reports that over the last five years, at least, credit unions have ranked higher than banks in the area of customer service.
3. Democratic Decision-making
As a member-owner of a credit union, it is you and the other members, not some elite board of directors, who makes the decisions. On all decisions before the credit union regarding its rules, policies, and operating procedures, every member has an equal vote. That means you help direct the course of the institution charged with securing your money.
4. Better Rates
As not-for-profit institutions, credit unions apply all the would-be profits they earn from their fees and investments back to the credit union and its members rather than distribute them among a pool of outside investors. As such, credit unions are able to offer better rates than institutions like banks. You can typically earn a higher rate of return on your savings and pay a lower interest rate on loans and fewer and lower fees, when they do apply, at a credit union than at a bank.
5. Free Education & Services
Additionally, another way that credit unions apply earnings to benefit members is by offering a wider selection of relevant services for members. These offerings might include financial consulting services and personal health insurance. One service many credit unions are able to offer members is free education through group courses and one-on-one counseling on topics such as retirement planning and credit counseling.
6. Helping You Serve Your Community
As a member-owner of a credit union, you get the satisfaction of knowing that your money is being utilized to help other members of your community. Whether that be the community where you live, where you work, or with whom you share a particular vocation or honor, such as a union-based credit union or military or veteran-based credit union.
Instead of filling the pockets of anonymous stockholders, with credit unions, your money is being used to help new small businesses start and succeed in your area. Your money is also helping to clean up local roads, improve local schools and housing, and help your neighbors to weather tough times.
One erroneous concern people often pose about credit unions is that they're too small, which they believe means it can be hard to access their money from anywhere outside the credit union's community or area of service. That couldn't be further from the truth, however. Credit unions are networked nationally to allow members access to funds through some 30,000 ATMs and 5,600 shared branches.
Another common false concern people raise about credit unions is that they are less secure than banks. The truth, however, is that credit unions are equally as secure as banks, only through a different mechanism. Where deposits into a bank account up to $250,000 per account are insured by the Federal Deposit Insurance Corporation, deposits into a federally-chartered credit union account are likewise insured up to the same $250,000 limit per account, only by the National Credit Union Share Insurance Fund.
Note here, however, that certain credit unions are not federally chartered but rather state-chartered, and state-chartered credit unions are not eligible for insurance with the National Credit Union Share Insurance Fund and may not even be required to hold depositors insurance, depending on the state. If a state does require its state-chartered credit unions to hold depositors insurance or if a credit union chooses to do so regardless of requirements, that insurance will be private insurance, and therefore should be investigated closely before you deposit money into an account at such an institution.
Many private insurers are legitimate and trustworthy. However, you still want to know where the funds backing your deposits are coming from. Since it's not the full force and faith of the US Treasury, you want to know the limits and restrictions on that insurance, including but not limited to any caps on claims and restrictions on what constitutes a valid cause for making a claim.