Credit unions offer attractive advantages for their members.
If you’re having trouble deciding where to stash your cash, then you’re probably a little overwhelmed by all the options available to you. However, if you’re hoping to avoid fees from ATMs and savings accounts, you may be interested in a credit union.
Credit union members enjoy a variety of benefits, including higher interest rates on savings and lower interest rates on loans. Credit unions are also becoming more popular for those interested in generating greater returns for their money.
What is a Credit Union?
To put it simply, a credit union is a financial institution like a bank – they accept deposits and provide loans, but they are “member-owned” and not-for-profit. They are owned by their members and are focused on increasing the quality and breadth of services available to their members while encouraging them to save money.
What is a Bank?
Much like their credit union counterparts, banks also accept deposits and provide loans. They are open to anyone and provide just as much security as credit unions. In terms of function, both credit unions and banks are financial institutions that help you save and manage your cash. But there are differences that may influence whom you decide to do business with.
What’s the difference between Credit Unions and Banks?
The most important difference between a credit union and a bank is their organization type. Banks are for-profit institutions, which means their risk assessments, lending decisions, and interest rates will be fine-tuned to maximize their profits and minimize losses. Banks are often owned by investors and seek to satisfy their interests before anyone else’s.
While banks certainly offer greater convenience with more physical locations, and often better web features and online apps, they can lack personability and usually have stricter eligibility requirements.
On average, banks usually give lower interest rates on savings accounts and higher interest rates on loans when compared to credit unions. That means your savings generate less money over time and you pay back more on loan payments.
All this, including various transaction and account fees, means your money won’t go as far as it would with a credit union.
Credit unions are not concerned with making an excess profit, which means the focus is on your financial success as a member with higher interest rates for your savings and lower interest rates on loans. They also provide ample financial literacy resources to help keep you knowledgeable about the best ways to manage your wealth.
It seems pretty obvious so far that credit unions are certainly more people-oriented than banks, as they should be, considering that members of a credit union share ownership of the credit union itself. This is because credit unions are organized as not-for-profit financial cooperatives.
When you join a credit union, you are helping to create your own personal banking experience. Additionally, as more people become members of their respective credit unions they begin to beneficially impact their local communities. Members share in their credit union’s success. This can lead to lower fees, even better interest rates, and more cash back for all involved.
Even throughout the COVID-19 pandemic, credit unions have seen a surge in mortgage lending and member deposit growth. This results in increased technological advances and wider access to loan participation, mobile banking platforms, and “Peer-to-Peer” (P2P) payment products such as Venmo and Zelle. With these continuing advances, credit union members can access their cash wherever and whenever they want.
Joining a credit union also allows you to become part-owner of something that can benefit you and your community and lets you share in the credit union’s vision and success.
Please note: This information is designed to offer a general understanding of common financial terms and practices and should not be considered financial advice from Charter Oak Federal Credit Union. Every individual has different financial needs and goals, which should be discussed with a financial professional.