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In today's age of online shopping and electronic fund transfers, almost everyone has a bank account. Bank accounts make it much easier to pay bills online, transfer money to others, and quickly shop by swiping a debit card. But many banks are piling on the fees, making a bank account a costly thing. If you're tired of paying banks to keep your money, it may be time to look for an alternative. One option is the credit union.
Credit unions are fundamentally different from banks. Banks are a business and are run by CEOs and other top executives. Credit unions, on the other hand, are actually owned by their members. These members can vote on how the union operates and what services it offers. Some also have different membership requirements. Eligibility often depends on the type of credit union. Some are open only to members of specific workplaces, for example.
Credit Union Benefits
There are a number of advantages to joining a credit union in addition to having a say in how the union is operated. Many people look to credit unions simply because they have fewer fees, but there are a lot of other great reasons to make the switch. Here are the benefits members of a credit union enjoy:
- Credit unions are not-for-profit organizations. That means that unlike banks, they aren't trying to turn a profit. They don't have to pay out dividends to stockholders. This is the reason why they can give their members so many benefits. By being a nonprofit, they also receive special tax exemptions, meaning more of the money can be put back into the union.
- Credit unions more often than not have lower interest rates on loans. According to a study done by the National Credit Union Administration, auto loans done through a credit union were on average almost two full points lower than those done through a bank. Most credit unions handle mortgages, home equity loans, personal loans, and auto loans.
- Interest on savings accounts, on the other hand, is often higher at a credit union. This means you'll make a little more money. Most banks have an average rate of return on standard savings accounts of about .50 percent, while credit unions are usually between .75 and .85 percent. Their interests on CDs and money market accounts are often higher, too. If you're going to place a large amount of money into an account, these higher percentages can really pay off.
- Many credit unions are actually a part of a larger network like the Credit Union Service Centers. This means that customers have access to their accounts from many different locations and can enjoy many of their benefits at all of the member unions.
- Credit unions, like banks, may offer credit cards to their customers. These credit cards usually have very low interest rates on them. Many are under 10%, and some have special rates that apply if you meet certain conditions, such as having your paycheck direct deposited to the credit union. Many credit union credit cards have rewards programs that are comparable or better than those offered by banks.
- Credit Union ATMs are free to use. There are absolutely no fees. You may have to pay a fee if you use a third-party ATM, but it's usually the third party's fee, not the credit union's.
- Just like banks, credit unions are insured by the National Credit Union Association (NCUA). The NCUA acts like the FDIC does for banks. This means your money is safe even if the credit union goes under. Often, instead of closing like a bank, credit unions that can no longer support themselves merge with another credit union.
These advantages show why credit unions may be a much better option than a traditional bank. If you're looking for a loan and want to lock in a low rate, don't discount credit unions. The same goes for someone looking for a good interest rate on a CD or is simply tired of paying a large amount in fees.