People had earlier associated banks with trustworthiness, longevity, and stability in the financial world. However, with the shake-down of the financial markets and the collapse of many financial institutions a few years ago, they have started questioning this thought. They aren’t sure anymore if banks are the best way to store, transfer, and save their money. That is why credit unions have become even more important.
A credit union serves the same purpose and offers similar products as a bank. However, it is a cooperative financial institution owned and operated by its members, and not the shareholders. So, it is like keeping your money with a non-profit organization that will also support your community with special benefits and financial support.
Additionally, it allows credit unions to offer higher interest deposit accounts and loans with better rates. That is why their strength in the United States has grown steadily and reached over 126 million by 2020.
Image Source: https://www.cpwrfcu.org/whats_a_credit_union.php
Although large financial institutions offer several benefits, there are just some advantages that you will not find anywhere but a credit union. These advantages are:
1. Lower Fees
Credit unions often offer lower fees than banks because they have a non-profit business structure and a tax-exempt status. So, instead of paying shareholders, they can reinvest the earnings back into their members while diminishing the need to charge fees such as overdraft penalties.
2. Better Loan Rates
Just like a typical bank, a credit union offers all products, from car loans to mortgages. However, they offer lower interest rates on loans because of a customer-centric model. They are not focused on generating profits for shareholders and are primarily aimed at creating value for their members.
Image Source: https://njfcu.org/rates/
3. Better Savings
A recent report has revealed that credit unions offer better interest rates than banks on their CDs and savings accounts. For instance, the national average rate for a 5-year CD was 0.76 for credit unions in the first quarter of 2021. However, the national average rate for banks was only 0.63.
4. More Accessibility
Big banks often find it difficult to cater to all their customers with the same warmth. That is why they seem cold, formal, and even unreachable. On the other hand, credit unions consider themselves “financial cooperatives” rather than financial institutions. So, they are not aimed at making more money from customers but addressing their needs through a jointly-owned and democratically-controlled enterprise.
5. Investments in Your Community
Credit unions are committed to improving the lives of those in their local communities. Unlike big banks that invest in large-scale industrial projects, these cooperatives usually partner with local organizations to keep their earnings circulating within their communities.
If you find the long lines and unresponsive customer service at the banks challenging, then credit unions are the right solution. They are community-focused, friendly places that offer better interest rates. You can compare them with the traditional banks and find that these places give you the best rates for the service you need.
