The Credit Union National Association reports that over 105 million Americans are members of a credit union. This makes up nearly a third of the population. But, a majority of Americans still use traditional banks to manage their money, and younger generations are reportedly less likely to use credit unions simply because they don’t understand and often ask – how does a credit unions work.
There are many benefits of switching from a bank to a credit union, but it can also be a hassle to make the move, which also requires you to reroute all your bill payments, direct deposits, and other forms of incoming and outgoing payments. If you’ve considered leaving your banking institution for a credit union, but you’re not sure if the benefits outweigh the hassle, keep reading to decide whether or not credit unions live up to the hype.
Government-Backed Funds
There are a lot of misperceptions about credit unions that prevent people from exploring this option for their financial management, including the idea that credit union funds are not backed by the government. This is completely unfounded, as the National Credit Union Administration insurance exists as the federal government’s protective shield for credit union consumers, similarly to how FDIC insurance works.
Better Interest Rates on Savings Accounts and Loans
MyCreditUnion.gov asserts that, compared to banks, credit unions tend to offer higher interest rates on savings accounts and lower interest rates on loans for their consumers. For example, a 36-month auto loan from a credit union comes with an average interest rate of 2.71%, which is significantly lower than the 5.26% average interest rate a bank would charge for the same loan.
If you want to find the best mortgage rate, personal loan rate, or interest rate on a savings account, switching to a credit union could save you thousands of dollars in interest than if you stay with your traditional banking institution and take out a loan through them.
Not only do credit unions have most of the bells and whistles of online bankingsuch as mobile apps, web-based account management, digital check deposits, etc. But, they typically offer networks of ATMs as well. In the past, banks consistently beat credit unions in terms of access to online banking and ATMs. They were larger and better-funded, after all, but credit unions seem to be catching up and even surpassing banks nowadays.
Credit unions recognize that they’re small institutions, but they’re still dedicated to making their members’ lives easier, which has led several credit unions to partner together and offer a massive network of fee-free ATM access. If your credit union participates in this program, you can find a surcharge-free ATM at almost 30,000 different ATMs and over 5,000 union branches across the country thanks to CO-OP.
Customer Engagement
According to a recent Gallup poll, 52% of credit union customers feel engaged (happy to be a part of the institution), while just 17% of national bank customers feel engaged. If you feel more like another dollar sign to an institution, rather than an appreciated member, then joining a credit union could offer unique benefits that make you feel more welcomed.
Customer engagement could include anything from helpful financial newsletters emailed on a monthly basis to events like member appreciation days or sign-up bonuses for when you refer a friend or family member to join. Since credit unions are typically non-profit, collaborative organizations, they have a very different approach to financial services than profit-driven banks do.
It would seem that credit unions do live up to the hype surrounding them, especially when it comes to customer engagement and favorable interest rates. Whether you need a personal loan, want to earn higher interest on your savings accounts, or you simply want a better overall experience with lower fees, several studies have shown that credit unions beat out banks in many of these categories.
Is it worth the hassle of moving all your money and rerouting your loan, utility, and credit card payments to the new accounts? That’s up to you to decide, but don’t miss out on the benefits of credit unions based on misperceptions we tackled above.
What do you think? Do Americans understand how does a credit union work? Do you still bank in a traditional bank or a credit union? Why or why not? I’d love to hear your thoughts.
Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network such as Allpoint or MoneyPass. May offer fewer products and services.
The main benefits of a credit union compared to a bank are that credit unions tend to offer better rates, better customer service, and lower fees. However, banks may offer more branches and products than credit unions.
People choose banks primarily because of the convenience of multiple branches across the country, along with better technology. On the flip side, people choose credit unions primarily because of discounted loan rates, higher interest rates and better customer service.
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.
Credit unions are insured by the National Credit Union Administration (NCUA). Just like the FDIC insures up to $250,000 for individuals' accounts of a bank, the NCUA insures up to $250,000 for individuals' accounts of a credit union. Beyond that amount, the bank or credit union takes an uninsured risk.
Just like banks, credit unions are federally insured; however, credit unions are not insured by the Federal Deposit Insurance Corporation (FDIC). Instead, the National Credit Union Administration (NCUA) is the federal insurer of credit unions, making them just as safe as traditional banks.
If you're considering a credit union that's on the smaller side, it might have a limited number of locations in your community. Finding time to visit the branch can be difficult, especially since some credit unions don't have the most flexible hours.
According to a study by Informa Research Services, credit unions have lower average rates on credit cards, auto loans, personal loans, and home equity lines of credit. In addition, credit unions have higher average return rates on personal savings, checking, money market, and 1-year certificate accounts.
Through right of offset, the government allows banks and credit unions to access the savings of their account holders under certain circ*mstances. This is allowed when the consumer misses a debt payment owed to that same financial institution.
Generally speaking, a good credit score is 690 to 719 in the commonly used 300-850 credit score range. Scores 720 and above are considered excellent, while scores 630 to 689 are considered fair. Scores below 630 fall into the bad credit range.
Credit unions are generally considered to be safer than banks during economic downturns due to their conservative approach to risk and their emphasis on financial robustness.
The membership of a credit union is restricted to a specific community, most often a religion, profession, or geographic location. For a member to be eligible to join a credit union, they must belong to a group listed in the credit union's charter.
So, get comfy. This is going to be a comprehensive look at credit unions': Upsides, such as better rates, more favorable terms, superior service, and fewer fees. Downsides, like more limited accessibility, finite eligibility, and narrower product and service portfolio.
Does joining a credit union build credit? Joining a credit union can help build credit, provided you follow the right steps. For example, if you join a credit union with bad credit, you may want to consider getting a secured credit card to improve your credit score. This is also an option if you're new to credit.
Lower fees: Because credit unions are not-for-profit, they typically charge lower fees than banks. Higher savings rates: On average, you'll find better interest rates at credit unions than banks, though some high-yield accounts at banks rank at the top of the industry.
Credit unions are generally considered to be safer than banks during economic downturns due to their conservative approach to risk and their emphasis on financial robustness.
Alliant Credit Union is fully digital and has the best APY across all accounts compared to other credit unions on our list. With a $100 minimum balance, Alliant's high-yield savings account earns 3.10% APY. Its share certificates also earn excellent rates as high as 5.20% on a 12-month jumbo certificate.
Introduction: My name is Margart Wisoky, I am a gorgeous, shiny, successful, beautiful, adventurous, excited, pleasant person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
