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If you are looking to change banks or are looking for a new mortgage, car loan, savings account, or other financial product, you may want to consider starting a banking relationship with an organization that is not at all a bank: a caisse.
Credit unions serve many of the same purposes and offer products similar to those of banks. But if you want to keep your money in a non-profit organization that supports your community with special benefits and financial support, a credit union might be the right choice.
Take a closer look at what credit unions are, how they work, and why organizations can be such a special place for your personal finances.
What is a Union credit?
A credit union is a non-profit cooperative financial institution owned by its members. Unlike banks, which are owned by shareholders and must distribute profits to their owners, credit unions are owned by their members, who are also their customers. More than 122 million Americans are members of credit unions.
Credit unions offer many of the same types of financial products and services as banks. However, a credit union may use slightly different names for its accounts and features, such as “shared checking account” instead of “checking account”. Because the customers of a credit union are member-owners, the credit union pays âdividendsâ instead of âinterestâ.
If you choose to keep your money with a federally insured credit union, you will also benefit from the credit union equivalent of FDIC insurance: the National Credit Union Administration (NCUA) provides federal insurance. up to $ 250,000 of eligible deposits per depositor, per insured credit union, for each category of account holder, in the event of credit union bankruptcy.
The bottom line is that credit unions are meant to serve as a safe place for people to save and borrow at reasonable rates. Due to their non-profit status and community-driven mission, credit unions can sometimes offer significant differences from banks and offer surprising benefits to their members.
Benefits of credit unions
The overall mission of credit unions is to improve the financial well-being of their members and to serve their communities. There are several important benefits you can expect from credit unions if you join a credit union.
Better rates on loans and savings accounts
Credit unions strive to provide reasonable rates to their members. Because they don’t have to pay shareholder profits like banks do, credit unions can often pass that money on to their members, offering higher APYs on savings accounts and CDs and Lower APR on loans. Credit unions offer some of the best checking accounts, high yield savings accounts, and CD rates.
Excellent customer service
Credit unions tend to score higher than banks in customer satisfaction surveys. For example, Consumer reports found that 96% of credit union members were “very satisfied” with their credit union. Since the customers of a credit union are also its owners, these institutions tend to focus heavily on providing customer service in a way that not all banks may be inclined or able to. to match.
Credit for small businesses and borrowers in need
Credit unions tend to give loans to smaller businesses that might be overlooked or underserved by big banks. If you are a small business owner or just want to support small businesses in your community, being a member of a credit union can help.
As non-profit organizations, credit unions also focus on providing loans to those in need. Many credit unions offer emergency loans of up to $ 5,000, or short-term cash advances / alternative payday loans of up to $ 2,000. Instead of going to a payday lender, many people can get a better deal at a credit union.
Almost 50% of credit unions have the specific mission of serving low-income communities. No matter what type of neighborhood, town or city people live in, credit unions intend to connect their local community to affordable financial services. Credit unions help their members save $ 12.6 billion per year by offering lower fees and higher returns on deposit accounts, as well as $ 5.6 billion in savings on auto loans.
Credit unions can make a big difference in the financial lives of people who might otherwise be charged high fees for check cashing services or paying higher interest rates on car loans they need to go to work. Simply by being present in the local banking markets of their communities, credit unions generate $ 4.9 billion in economic benefits annually.
Support for diversity and inclusion
Perhaps because they are so community-driven, with local connections in communities that might otherwise be underserved by traditional banks, credit unions place a strong emphasis on supporting diversity and diversity. ‘inclusion.
Compared to banks, credit unions have more than 10 times more women as CEOs. Credit unions are also more likely than banks to be Minority Depository Institutions (MDIs); there are more than three times as many MDIs from credit unions as there are MDIs from banks.
Many companies say how much they care about diversity and inclusion. Credit unions make this part of their day-to-day work by meeting the financial needs of various communities.
How to join a credit union
Credit unions may have limits on who can qualify for membership. For example, some credit unions serve the military community, and you can only join if you are an active duty military, veteran, certain other government employees or contractors, or their family members. Other credit unions may have a scope of membership based on a particular employer, university, union, or geographic area.
While some credit unions are limited to certain employers, types of workers, or geographic areas, in general, many credit unions are open to all members and will be happy to accommodate you. Some credit unions are digitally driven and have a nationwide membership base. No matter where you live or work, you may be able to join a national credit union and access their rates on loans, CDs, and savings accounts.
As part of the process to join a credit union, you may be required to pay a fee or donate, usually between $ 5 and $ 25, which is the cost of purchasing a share of the property. the credit union. You can join a credit union by going in person to a branch or by opening a new account online.
Credit unions versus banks
After seeing the benefits of a credit union, you might be wondering why someone would choose to put their money in a bank. It is true that credit unions have valuable benefits and attractive offers. There are complex reasons why people choose their banking relationship. Some banks may offer a full range of financial products, better mobile banking app features, easier international banking, or better digital banking tools.
Depending on what you need from your banking relationship and day-to-day financial management, keeping your money in a credit union can help you save on fees, get a higher return on your savings, and get a better rate. on a loan and improve your financial well-being, while supporting an organization that makes a special contribution to the economic empowerment of your community.
If this all sounds like a good deal, then a credit union may be right for you.
Frequently Asked Questions (FAQ)
What is a stock trading account?
A stock trading account is a credit union checking account. It works the same as a bank account, but you may be more likely, as a member of a credit union, to earn dividends (i.e. interest) with a checking account than ‘with a bank account.
What financial benefit do members receive as part of their membership in a credit union?
According to the June 2021 Membership Benefits Report from the National Association of Credit Unions (CUNA), the direct annual financial benefits of membership in a credit union were $ 109 per individual member or $ 229 per member household. The more you use your credit union for additional products and services, the more benefits you are likely to receive.
For example, the report also found that by getting a car loan from a credit union for a new car of $ 25,000 for 60 months, members would save an average of $ 199 per year in interest, or about $ 1,000. savings over five years compared to a typical bank auto loan.
What are other examples of how credit unions support their communities?
Credit unions offer community participation and financial support in several important ways beyond their day-to-day operations, such as providing financial education, small business loans, and home loans to low-income borrowers. For example, more than half of home loans from credit unions go to people with average or lower incomes.