With millions of Americans trusting their finances with a credit union, you may be curious about what the fuss is all about. First of all, credit unions operate a little differently than banks do — they’re not-for-profit financial cooperatives that are owned by its members. A credit union’s members are the ones who contribute to its pool of deposits and gain exclusive access to low-interest rates on loans.
Credit unions can also come in all shapes and sizes — some credit unions like Navy Federal can house millions of members across the nation. In comparison, local credit unions may only operate with a few hundred members.
Regardless of whether you look into a national organization or a local branch, there are a few reasons why you can benefit from joining a credit union.
You Can Get Better Rates and Lower Fees
One of the significant advantages that come with joining a credit union is lower interest rates. Typically, because of the lower overhead, credit unions can charge lower interest rates on loans and offer higher interest rates on deposits. One 2015 study found that while only 37% of banks could offer free checking accounts, around 72% of credit unions were able to.
Better rates aren’t limited to loans or deposits, either — many customers choose to take a credit card out with their credit union since they can get a more favorable rate. The same can be said for opening a savings account or putting your money in a CD. While rates can vary from branch to branch, credit unions are typically able to offer their members better rates and lower fees.
If better interest rates and lower banking fees aren’t enough of an advantage, another perk with credit unions has to do with your voice. Since credit unions are owned by their members, you can have a more prominent voice in how the union runs. In smaller or local credit unions, members often vote on an annual basis to elect a volunteer board of directors for overseeing day-to-day management.
If you find that there’s an issue with how the credit union is running, you can use your influence to speak up and even change how the branch is running. In comparison, trying to voice a complaint to a bank can be much more difficult. There’s often a chain of command, and it can take weeks or months before anybody addresses your complaint.
You Might Earn Dividends
Although it doesn’t happen all the time, an exclusive benefit of working with a credit union is that you could earn a dividend if your union performed well during the year. However, while you may see a dividend at the end of the year, there is a downside to credit unions.
Unlike banks, credit unions often have a smaller geographic reach. If you’re traveling, it can be difficult to find an ATM — especially if the branch you’re a member of is local. If you do plan on traveling regularly, you might want to invest in a larger credit union with a broader reach.
Community is a Bigger Priority
One complaint that some customers may have about banks is that the service can be impersonal. With larger banks, getting a flexible interest rate or waiving a fee may be impossible since employees have limited power to change or modify corporate policies.
With credit unions, especially local branches, members receive more personal attention. Since the number of people they deal with is often much smaller, credit unions can work closely with their members and form relationships that wouldn’t normally happen in a larger bank. Employees in a credit union can get to know you and become familiar with your specific situation (which can come in handy when it comes time to borrow money or open a checking account).
This personal attention and valuable customer service is one reason why so many people choose to join a credit union.
More Willing to Work With Bad Credit
If you have poor credit, getting a loan from a bank can feel impossible. However, one reason to look into joining a credit union is that they may be more willing to work with you if you have bad or poor credit.
When you try to obtain a loan from a credit union, a loan officer will meet with you on an individual basis and try to find loan terms that will work for your specific circumstances. This is especially true if you’re dealing with a local credit union where you may already have a relationship with the employees who work there, or if you’re trying to get a mortgage loan.
While some credit unions may allow you to apply online for a loan, it’s always a good idea to meet with a loan officer in person to improve your chances of getting approved.
While joining a credit union can sometimes be tricky due to membership restrictions and guidelines, these organizations are often worth the extra effort you may have to put in to become a member. Not only can you get better interest rates and lower fees on checking accounts and loans, but any member of a credit union will have a bigger voice and more influence when it comes to day-to-day operation and management in the branch.