What advantage does a credit union offer its customers?
Overall, credit unions offer many benefits over banks, including lower fees, better interest rates, personalized service, community focus, and member ownership. If you're looking for a financial institution that puts your needs first, consider joining a credit union.
Pros of credit unions
Credit union profits go back to members, who are shareholders. This enables credit unions to charge lower interest rates on loans, including mortgages, and pay higher yields on savings products, such as share certificates (the credit union equivalent of certificates of deposit).
Credit unions tend to offer lower fees than banks. This is because of their not-for-profit business structure and their tax-exempt status. Rather than paying shareholders, credit unions are able to reinvest their earnings back into their members, decreasing the need to charge fees such as overdraft penalties.
Higher Savings Rates and Lower Loan Interest Rates
Make credit unions your first stop when considering other types of loans, too. From car loans to mortgages and business loans, you may be surprised by how much more affordable your local credit union's offerings are compared with traditional big banks.
Credit unions operate to promote the well-being of their members. Profits made by credit unions are returned back to members in the form of reduced fees, higher savings rates and lower loan rates.
You have to be a member of a credit union in order to take advantage of its products and services. And when you become a member with your initial $5 deposit in your savings account, it means you're a part-owner of the financial institution, not a customer. You are a shareholder.
Because credit unions are not trying to earn a profit, they can pass those savings on to their members. Credit unions typically offer a higher interest rate on the money that its members deposit than banks can offer to their customers.
Some of the challenges Credit Unions face are not of their own making: pressure to offer 'free' services and apps, like the banks; difficulties with mergers to achieve economies of scale; ongoing decline in the grants, reliefs and financial support available from local councils.
The Bottom Line. Credit unions can be ideal for a low-interest loan, lower mortgage closing costs, or reduced fees, but you'll need to qualify for membership. Larger banks may offer you more choices regarding products, apps, and international or commercial products and services, and anyone can join.
Generally, credit unions are viewed as safer than banks, although deposits at both types of financial institutions are usually insured at the same dollar amounts. The FDIC insures deposits at most banks, and the NCUA insures deposits at most credit unions.
Who are the top 5 credit unions?
The largest credit unions in the U.S. include Navy Federal, State Employees', PenFed, Boeing Employees', SchoolsFirst, Golden 1, America First and Alliant.
Clear, honest communication is vital to building trust and loyalty among members. They appreciate regular updates on their accounts, explanations of new services, and straightforward information about fees and charges.
Any income the credit union generates through interest, fees and loans is then used to fund community projects, reinvest into the organization or provide services that directly benefit members, like paying higher savings interest rates.
With a credit union, you might have to do some extensive research to compare accounts and find out what services they offer. Credit unions only serve certain groups of people and if the ones you can join don't have mobile banking or their apps aren't up to par, that could potentially be a major disadvantage.
Through “right of offset,” the government allows banks and credit unions to access the savings of their account holders under certain circumstances. This is allowed when the consumer misses a debt payment owed to that same financial institution.
Interest Rates Comparison
Typically, credit unions offer higher interest rates on savings and lower rates on loans. This is largely because credit unions are not-for-profit entities; they return profits to their members in the form of better financial terms rather than distributing profits to shareholders.
Better interest rates: Credit unions typically offer higher interest rates on savings accounts because they have lower overhead costs than banks. Similarly, they offer lower interest rates on loans. Customer service: Credit unions pride themselves on offering better customer service than banks.
Lower Fees
One of the most significant advantages of joining a credit union is the lower fee structure. Traditional banks often charge various fees for account maintenance, overdrafts, and ATM usage. These fees can add up quickly, eroding your savings over time.
Credit unions offer most of the same products that banks offer, but they are members-only, nonprofit financial institutions. Credit unions still charge fees in the same way banks do, but any profits are returned back to its members in the form of improved or more affordable products.
Choosing to use a Credit Union
The downside of credit unions include: the eligibility requirements for membership and the payment of a member fee, fewer products and services and limited branches and ATM's.
Why do people prefer credit unions over banks?
Credit unions go beyond standard banking, offering lower fees on loans, higher dividend rates on accounts, and more personalized member benefits. Unlike for-profit banks focused on maximizing shareholder profits, credit unions are member-owned, non-profit financial institutions.
Credit unions aim to serve members by offering competitive products with better rates and fees than you see with a for-profit bank. Like a bank, credit unions charge interest and account fees, but they reinvest those profits back into the products it offers, whereas banks give these profits to its shareholders.
Poor risk management of residential and commercial mortgage loan concentrations, in particular, is having an adverse effect on credit unions nationwide; resulting in significant loan losses, earnings deterioration, capital depletion, and increased credit union failures.
FDIC. Both the NCUA and FDIC are responsible for insuring funds in the event that a financial institution fails. The NCUA insures credit union accounts, while the FDIC provides insurance for bank accounts.
Credit unions and banks are both insured, with most banks being insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per customer. Most credit unions are similarly insured by the National Credit Union Administration (NCUA) for up to $250,000.
