When deciding whether a credit union is the right kind of financial institution for you, there is a multitude of things to consider. As with any based financial decision, it is imperative that you do your due diligence and research what joining could mean for you and your money.
Here is a brief look at both the advantages and the disadvantages of using credit unions have a lot to offer over a regular bank.
One of the most attractive features of a credit union is that they typically pay higher interest rates on all deposit accounts - regardless of whether you are depositing into checking, money market or savings account. This increase in rates can range anywhere from 4 to 10 times the amount of interest you would receive from the more traditional commercial banks. However, it should be noted that online banks offer interest rates that are often either competitive or better than the rates that are offered by credit unions.
A lot of people are surprised to learn that credit unions offer the same financial products as banks. One of the most popular things that people use their credit unions for our car purchases. This is because the rate is normally lower than dealer financing and because commercial banks are normally a percentage point or two higher than credit unions. Credit unions also offer relatively low APRs on personal loans, business loans, mortgages, and credit cards.
Credit unions have few fees compared to large-scale national banks. In fact, many offer everything from checks, withdrawals, and electronic transactions free of charge. Many also offer basic checking accounts that do not require a minimum balance and without a monthly account servicing charge. This could save you thousands of dollars a year. Like most banks, credit unions do charge a fee when a check bounces or you go into overdraft like traditional banks. However, the amount is usually significantly much less.
With traditional banks, the board of directors and management teams wants to make as much profit as possible. Unfortunately, the steps to achieve this often ends up contradicting the goals of its customers, who want to enjoy low rates, fees, and the best customer service possible. However, in order to provide this level of service, banks must cut into their profits. This is not something that they are inclined to do.
However, due to the membership structure that a credit union has, all members have an equal vote in any decisions made by the credit union. They must also work to serve one another. Therefore, the credit union has more incentive to provide low rates, fees, and great customer service.
Due to the fact that credit unions have small branches, they can offer fast and personal service. Many credit unions even assign one person to work with you. This can be a wonderful thing if you visit a specific branch often, as it allows you to develop a working relationship.
People go through rough times, and sometimes your credit history ends up taking a hit. Unfortunately, if you have a less than perfect credit history, issues with your employment, or live on an irregular income, many banks will deny you a loan or credit card. Since banks process hundreds to thousands of applications a month, often they streamline the process by setting requirements on income, credit scores, and deposits. So, if you do not meet these requirements, you are simply declined without further consideration since one lost customer means little to a large bank in the long term.
On the other hand, because credit unions are smaller and have a member-focused philosophy, they are often more willing to work with you even if you have a troubled financial past. A credit union may also make exceptions for existing members in good standing should any unexpected issues arise with your application for a loan or credit.
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