People have associated banks with trustworthiness, longevity and stability in the financial world – at least, until recently. With the shake-down of the financial markets and the collapse of many financial institutions, many of us are starting to question if banks are the best way to store, transfer and save our money.
- Credit unions are community-based banking institutions that are owned in-part by the union's depositors and customers.
- Similar in many ways to traditional banks, credit unions also come with some additional advantages that some may find attractive.
- A focus on the community, attractive rates, and added perks might lure you away from your bank and to your local credit union.
Misconceptions About Credit Unions
Jenn Cloud, a former spokesperson for Missouri-based Vantage Credit Union, originally founded by members of the St. Louis Suburban Teacher's Association in 1957, noted that credit unions are often mistaken for "a payday lender or some exclusive club that requires you to be a part of a union or work in a certain field to join." But, continued Cloud (now a digital marketing manager for RedKey Realty Leaders in St. Louis), neither of these misconceptions are true. So if you're considering a credit union instead of a bank, there are quite a few reasons to make the jump.
1. Friendliness and Accessibility
Big banks can seem cold, formal and even unreachable – and those are the ones that still have bricks-and-mortar offices. It often seems that branch managers don't have the authority to make the decisions to help you, or that the bank itself is so enormous it doesn't really care about having your business. Credit unions can be friendlier in atmosphere and tone, and simply more accessible on every level. According to Cloud, "being smaller and local allows them to be very connected to their neighborhoods and versatile to respond to feedback."
2. A Co-Op, Not a Corporation
Credit unions often consider themselves "financial cooperatives" rather than financial institutions. The goal is not to make more money from customers, but to "address a common need through a jointly-owned and democratically-controlled enterprise," according to the Seattle Metropolitan Credit Union.
3. Nothing to Lose
According to Cloud, the only standard requirement for membership in most credit unions is that you live in the area. According to Cloud, credit unions offer all the same services as banks: "checking, saving loan and investment options."
4. It's a Democracy
Perhaps the most outstanding feature of credit unions is that they are member-owned and member-run. Credit unions are free to make decisions to benefit their members, rather than seeking to please "some removed group of stockholders somewhere," said Cloud.
5. Better Rates
"Being member-owned generally allows the rate of returns on savings accounts to be higher and the interest rates on loans to be lower than at a bank," noted Cloud.
The ability to make money on your own money is a huge step in the right financial direction, but something that's often out of reach at a corporate bank unless you reach a high dollar balance in your account. Since profits to stockholders aren't a part of the company vision, credit unions are free to pass surplus money on to members "in the form of fewer fees, more services, lower interest on loans and higher dividends on deposits," Cloud said.
6. Beyond-Banking Perks and Free Education
Some credit unions, such as Vantage, offer other products, such as individual health insurance and financial advisory services, said Cloud. Most credit unions focus on community enrichment and financial education, with many offering free classes or other educational services to the community.
The Bottom Line
When it comes to banking services, credit unions offer the same menu of financial services that you'll find at large banking corporations.
If you're frustrated with long lines and unresponsive customer service, a credit union might just be the best place to put your money. It's tough to beat a place that's community-focused, friendly and offers better interest rates. Just be sure to do the comparison shopping with both traditional and online banks and make sure the credit union you are considering offers the best rates for the service you need. (For more on credit unions, read Tired of Banks? Try a Credit Union.)