Why you should join a credit union instead of a bank

When you think about money – saving it, paying bills with it, earning interest on it – you probably think of a bank. Or possible Scrooge McDuck swims in a pool filled with gold coins– but probably a sofa. The average person in this country has that after all, more than five bank accountsdespite the fact that banks are not always the best or friendliest places to store your money. Banks are the default location for your money, so you can earn a (depressingly small) amount of interest, have a place to deposit your paycheck, and pay bills.

But they are not the only choice of these services. If you’re looking for a place to store your savings and make basic financial transactions, you should look into it credit unions. Although the number of credit unions has declined over the years (there are currently about 4,600 insured credit unions across the country), their membership has steadily increased, with almost 140 million members from last year.

There are some very good reasons why more and more people are joining credit unions – reasons you should also consider.

The main differences between a credit union and a bank

At a glance, credit unions look exactly like banks. They both offer many of the same services, including checking and savings accounts, loansand other financial products. The basic difference between a sofa and a credit union is the profit motive: banks operate on a profit basis, while credit unions operate on a nonprofit basis. In other words, the bank takes your money, invests it and pays you a criminally small amount of interest for the privilege. A credit union reinvests any profits into its membership the community.

The other difference is in who uses them. Banks are open to everyone, although under certain circumstances they may close an account or refuse to open one. Credit unions are run on a membership basis, and there is usually a requirement around that membership meeting the standards set by the National Credit Union Administration (NCUA), whether in a specific profession, a local group such as a church or school, or living in a specific community. Like banks, credit union funds are federally insured up to $250,000, but the NCUA handles the insurance rather than the Federal Deposit Insurance Corporation (FDIC).

In practice, credit unions function much the same as banks. But their nonprofit orientation and community focus offer several important benefits that make joining an organization a very good idea.

Benefits of Joining a Credit Union

Credit unions offer several advantages over a bank:

• Higher savings interest. Because credit unions use their profits to benefit their members, they almost always offer significantly higher rates on savings accounts, certificates of deposit (CDs) and other financial products (with some exceptions).

• Lower interest rates. Credit unions also typically offer better deals on loans and mortgages, including 15- and 30-year fixed-rate mortgages. Their used car loans are significantly better: the average interest rate on a 48-month used car loan from a credit union is about 1.5 points better then at a bank.

• Lower costs and lower minimums. Credit unions typically offer fewer and lower fees than banks. This could be checking accounts, for example 79% cheaper at credit unions than at national banks, and 54% cheaper than even small community banks.

• Community and voice. The crucial aspect of a credit union is that you become a co-owner when you join. That gives you a voice and a say in electing board members, setting policies and influencing where the credit union invests its money. That also means that credit unions tend to be much more community-oriented than banks, and more willing to lend to small businesses that banks may find too risky or yield too little return.

• Flexibility. Because you are a member (and co-owner) of the credit union, it is often much easier to qualify for loans or make special financial arrangements than through a bank. That doesn’t mean there aren’t any qualifications that need to be met or that the credit union is just handing out money, but they are often more willing to do so. work with their members despite low credit scores or other problems that banks don’t want to deal with.

Cons to consider

One disadvantage to consider with a credit union is the ATM network: some credit unions don’t have a large reach in terms of ATM access. Many are members of third-party ATM networks such as Allpoint or MoneyPass, which can extend their reach, so it’s worth checking if you use your ATM a lot.

While credit unions offer many benefits, there are obviously circumstances where banks are the best option. Banks generally offer more services. And since credit unions have membership requirements, you may not be able to find one that’s easy to join. And larger banks also offer national (and possibly international) reach and more robust and secure online tools than some credit unions. But if you’re looking for a locally focused banking experience that gives you a voice, a local credit union (Here’s how to search for it) is unbeatable in terms of local focus, costs and involvement.