The best benefits that Credit Unions give are lower fees for loans and higher interest rates for a savings account. There are also a variety of services that can help you repair your credit score.
Depending on your financial situation, joining a credit union might be a great option.
There are numerous benefits that these unions offer for members. Also, the community-driven policy is what differentiates these unions from most financial institutions.
What is a credit union?
A Credit Union is a cooperative that offers various financial services. In a simple explanation, these unions operate much like a traditional bank (offering loans, saving money, etc.), but instead of being owned by stockholders (like corporations), a credit union is owned by its participants.
Participants of a credit union will deposit their money into the co-op fund. This fund will then be used to provide the services for members.
Typically, a portion of the fund is invested in profitable ventures to generate income. Just like banks, credit unions often put their investments on bonds, stocks, and mutual funds.
Credit unions vs. banks
As stated above, one of the most significant differences between a credit union and a traditional bank is ownership.
And unlike banks, unions are not driven for-profit and don’t have any obligation to make money for their stockholders. Credit unions are only required to make enough earnings to keep operations running smoothly.
Banks have a wider variety of services offered and have better technology compared to credit unions. You can access your account and use your money via internet banking or ATMs all around the country.
Its services are far more convenient, and anyone with an account can use these aforementioned services.
However, credit unions offer better interest rates in both savings deposits and loans. Credit unions are also known to provide better customer service and more flexibility to their members.
If you’re in a tough financial spot, using credit unions’ services would be a far better and faster option.
8 benefits of being a credit union member
Credit Unions are not for everyone. They have both strengths and weaknesses like other financial institutions.
1. Better interest rates
If you’re trying to save with ease, one of your best options is depositing your money into a credit union account. Interest rates on Certificate of Deposits and personal savings accounts are higher than traditional banks.
This makes it more profitable for depositors, as more money is generated on their funds while doing nothing.
According to Bankrate, the national savings account interest rate is 0.07%. Credit Unions can offer as high as 6.7% annual yield.
2. Member-Friendly loans
Most people join Credit Unions due to the lower rates offered on most common debt options.
Mortgages, car loans, credit cards, and personal loans have lower interest or APR than what traditional lending institutions and banks are offering. This is to make sure that the co-op helps its members financially while also keeping the institution afloat.
3. More flexibility on banking requirements
Financial misfortunes happen. Not all people with bad credit have bad payment habits or troubling financial attitudes.
And that’s the reason why the majority of Credit Unions have a more flexible and forgiving standard for their loan requirements.
Unions would help those who have problems accessing financial services from traditional institutions because of their troubled financial state (e.g., low credit score.)
4. They can help rebuild your credit score
Credit scores are one of those things which don’t seem so important until you need to use a financial service. And if you have a bad or a blank credit score, it can cost you an arm and a leg to make it better.
Traditional financial institutions will often avoid offering their services to people who have bad credit. However, that’s not the case when it comes to credit unions.
There is a great variety of financial tools and services offered to help someone fix their credit scores without risky financial bets. This includes the aforementioned lower interest rates for loans, making paying on time a bit easier or possible.
5. Members will usually give you financial advice
Credit unions aim to help their members have a better financial state. And one of the best things that they offer to their members is personalized credit assistance.
The knowledgeable members of the union will try to educate other members about things involving financial literacy. And most of the time, these bits of useful information are given for free.
Although most credit unions only offer education for credit and money matters, some co-ops go far and beyond these two topics. Members can attend workshops from financial advisors that give free financial advice.
6. Low fees
Of course, just like traditional banks, credit unions would also charge their members some fees and other administrative matters. These monthly service fees are often associated with loan origination fees and other services. After all, there are bills and expenses to be paid monthly.
However, these associated fees are often lower than their bank counterparts. Take note that these low fees are partially due to a lack of other services (no ATM maintenance and no cloud system fees).
Overdraft charges, which cover checking account payments and withdrawals that exceed the account’s available funds, are remarkably lower.
7. Credit unions are focused on helping members
Customer service is overall better than the monotonous approach of bigger banking institutions. If you’re having a hard time with your finances, a union staff will likely offer help and advice to make things better.
They are likely to put effort into working things out with a depositor instead of rejecting people because of failed requirements.
After all, the members of a credit union are its “stockholders.” Most unions operate to meet the needs of their members.
8. You have a say on the union’s decisions
Since credit unions are owned by the members, each depositor will have a say in the union’s decisions. You have a say on the important matters of the co-op, such as electing credit union board members and more.
It’s similar to how banks work with their stockholders, in which all members will vote on the company’s decisions based on the portion of the stock they own.
Who is a credit union for?
Credit Unions are for people who need to fix their credit scores and access better interest rates for their saving accounts. This is also for people who want to belong to a community that helps their financial needs.
How to join a credit union?
Joining a credit union is similar to creating a savings account in a traditional bank. First, you need to find the nearest credit union in your area. Fill up the signup form and submit the requirements to open an account—and you are all set to go!
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