At a very first glance, you will think that there is no difference between a credit union and a bank. A closer look will prove you wrong. You will find that they do offer few financial products that are quite similar to the ones offered by banking institutions but they operate differently. You have many options to choose from both locally and from way beyond.
It may be mentioned here that the credit unions that are federally insured hold as much as $1.45 trillion in assets. Not only that they boast of more than 30,000 ATMs dotted across the country.
In this write-up, let us discuss few aspects of credit unions under the following sub-topics, namely,
- Definition of credit unions
- Benefits of Credit unions
- Benefits and drawbacks of credit unions versus banking institutions
So, let us take one sub-topic at a time in the paragraphs below.
Definition of credit unions
A credit union is referred to as a financial institution that is non-profit in nature. It is owned by those people that use these financial products.
If you are a credit union member, you will be allowed to access all those products that you would have otherwise been able to enjoy like savings accounts, loans, checking accounts, and credit cards. These unions are managed by a board of directors that are elected by the members.
What is the objective of a credit union? The main aim of these financial institutions is to ensure that you can enjoy competitive products at rates that are better than for-profit financial institutions or banks.
One of the main differences between a bank and a credit union is that when banks make profits, they share it among their shareholders. On the other hand, when credit unions earn profits, they reinvest the same into the products.
We know that credit union is owned by members. However, you will have to qualify to become a member of the same and also enjoy the products on offer like taking out a loan or applying for a plastic card.
Benefits of Credit unions
Have you ever thought of turning to a credit union instead of a bank? And if you have, how will you benefit from the same? Let us find out more about it. You will be able to enjoy the following facilities listed below-
- Enjoy members share in the ownership
- You can avail of shared ATMs and branches
- Insured deposits
- Favorable rates of interest and low-cost products
- Commitment towards the community
So, let us find out more about these advantages that you will be able to enjoy in brief-
Enjoy members share in the ownership
Unlike banks that are for-profit in nature, the credit unions allow account holders to vote to elect the board of directors. This can help in influencing certain decisions related to the expansion of services, adding, or modifying products. Also, as an account holder, you can enjoy financial benefits due to the ownership.
If you have preferences as far as credit unions are concerned and bother about their reputation and credibility, try getting associated with the best credit unions in the United States like America First credit union and Wright-Patt credit union.
Two other credit unions that operate in the US as preferred financial institutions include America First Credit Union, which is a federally chartered institute with headquarters in Utah. The other one where you can become an account holder is FORUM Credit Union.
It offers checking accounts for a free, facility to pay online bills, for business accounts, auto loans, take out mortgages, and home equity loans just to mention a few among others.
You can avail of shared ATMs and branches
If you are an account holder in any of the credit unions, you will be able to participate in shared network branches and ATMs and take your transactions to completion.
Banks extend protection for your deposits exceeding a particular amount of money and are insured by the Federal Deposit Insurance Corporation. With credit unions, your deposits are insured too through the coverage offered by NCUA. The credit union will also protect your retirement accounts like IRAs as well as trust accounts.
Favorable rates of interest and low-cost products
As of December 2018 credit unions were shelling out 2.35% for a 5-year $10,000 certificate of deposit (on an average) as per the government’s NCUA or National Credit Union Administration. This was in sharp contrast to what banks were shelling out then, a figure of 1.89% on an average. The fact that credit unions are not for profit in nature, they attract lower fees.
Commitment towards the community
The role of credit unions is beyond banking. There are many instances when they organize golf outings annually, the proceeds of which are used for charitable purposes.
Benefits and drawbacks of credit unions versus banking institutions
As an account holder in a banking financial institution, you have to bear ATM fees and fees for your savings account. However, you might want to save this money instead. If this is the case, you can migrate to credit unions.
They not only have higher return rates to offer but you can also avail loans at lower rates of interest. In fact, as per a report furnished by the Credit Union National Association (CUNA), January 2019, there were more than 118 million Americans that were account holders in more than 5,700 credit unions across the country.
Let us draw up a comparative account of both these financial institutions about various aspects.
Banks versus credit unions
What are the pros of credit unions?
Check out the following-
- As far as eligibility requirements are concerned, they are less rigid.
- The rates of interest are low
- The credit unions offer insured deposits
- Financial literacy resources are more
What are the cons of credit unions?
- The financial products are limited in nature
- Physical branches are fewer in number
What are the pros of banks?
Check out the following-
- With banks, you can enjoy online banking services, app services, tools, and several other features
- There are additional advantages that they offer
What are the cons of the banks?
- The eligibility requirements are strict
- Transaction fees are high
- Rates of interest are high
Enjoy an account at the credit unions of your choice to get the most out of your financial needs. Ranging from plastic cards to various other financial products, you can select one depending on your needs. Fund your business operations if you are falling short of the investment amount. There are various favorable terms and conditions that you can enjoy here.