- Francesca Sacco
6 Advantages Credit Unions Have over Banks, and Why You Should Join One
If you’ve only done your banking at a traditional bank, the value of a credit union can be hard to understand. On top of that, the big advertising budgets afforded by banks mean that consumers start their financial journey having a stronger familiarity with big-name banks as opposed to local credit unions.
But don’t be fooled by the spin those ads put on traditional banking. Thanks to its unique business structure and organizational mission, a credit union offers a number of important benefits over for-profit banks.
Here’s a look at six benefits you’ll enjoy when you join a credit union.
1. Credit unions typically offer more competitive interest rates.
Because credit unions are not-for-profit organizations, their primary goal is to provide valuable service to their customers. As a result, APRs tend to be lower than what traditional banks offer, since credit unions are only looking to cover their operating costs.
This means less interest paid and more money in the pocket of borrowers. In terms of the overall cost of loan products, credit unions can create measurable financial incentives for their own products and services in contrast to traditional banks.
2. It’s easier to qualify for loans with less-than-perfect credit at a credit union.
To join a credit union, you have to meet certain qualifications of membership. This membership offers a number of benefits, including the long-term relationship you develop as a member.
Over time, a strong track record of membership can improve your ability to qualify for credit and low rates from the credit union. Even if your credit takes a hit, your reputation may open doors at a credit union more easily than at a traditional bank.
3. You can earn more from interest on your savings accounts.
Credit unions don’t just lower the interest charged on loans. They also increase the interest paid out for savings accounts, money market accounts, certificates of deposit and other savings vehicles.
For consumers that want to keep cash on hand through a financial institution, credit union savings vehicles can generate more passive income to enrich your finances and generate more value from your banking relationship.
4. Credit unions have a local community presence.
When you bank at a big bank, your money ultimately supports leaders and banking headquarters located far away from your community. Credit unions, by contrast, have a local presence that means your membership is supporting the local economy.
This local presence can also give credit unions an advantage when providing small-business loans and other financial services for needs and challenges specific to your community. With local economic knowledge to guide their decision-making, you may get better customer service and higher odds of approval by going local.
5. As a member, you have a say in big decisions affecting your credit union.
When you’re a member of a credit union, you have a voting say on certain decisions that affect the direction of the credit union.
This stands in stark contrast to a traditional bank, where executives alone are tasked with those decisions. Credit unions empower members to influence how the institution is run, which means you aren’t subject to the decisions of business leaders looking to maximize their profits.
6. Not-for-profit credit unions aren’t looking to generate a profit, which keeps fees low.
When your financial institution isn’t prioritizing its own profits over your customer experience, you end up enjoying a better all-around experience. This includes lower fees for overdrafts, account minimums and other costs that traditional banks will use to pass to their customers—all in an effort to increase their revenue.
From their financial products, fees and interest rates to their superior customer service, credit unions can offer a number of important and measurable benefits over local banks. Don’t wait any longer to start enjoying all of these benefits. Open a checking account today.