Credit unions are not-for-profit, tax-exempt financial institutions or cooperatives that are owned by their members. They are created and operated for the purpose of providing a variety of financial products and services to their members, which include savings options, access to fairly priced credit, financial education, and facilities where transactions can be made at equitable cost.
Being a member of a credit union offers unique benefits that cannot be provided by other types of financial organizations like banks and microfinance institutions that derive their funding from investors, grants, and external loans.
To get you acquainted with some of these advantages, we’re providing you with a rundown of the most popular ones below.
They are not-for-profit cooperatives – While credit unions aren’t exactly charity organizations, their main reason for existence is to provide their members affordable financial products and services, not to turn them into milking cows by making them rely on expensive options. As member-run, democratically governed enterprises, credit unions typically have their members’ best interests in mind.
Accessible and approachable – Some people have the misconception that credit unions are not easily accessible because individual institutions tend to form around common links, with their members often belonging to particular geographic areas, workplaces, associations, church organizations, and the like. The truth is that this very character of credit unions is what makes them more relaxed, friendlier, and more approachable compared to banks. There’s a sense of community, and this often serves a motivation for those running the institutions to provide a more personalized kind of service for their members.
Lower interest rates – Credit unions enjoy the advantage of being able to translate their savings as not-for-profit organizations into lower rates on credit (mortgages, car loans, personal loans, and so on) and higher rates on savings accounts. This makes them very attractive to many people.
Various perks – Credit unions often offer customers perks and resources that provide added value to their existing services. These include financial literacy classes and community development programs.
They also provide banking-related perks like charge-free ATM withdrawals. Often, you can withdraw cash from third-party ATMs for free if they belong to a network of participating machines. And don’t make the mistake of thinking that credit unions have limited branches and banking facilities. For instance, American interbank network CO-OP Financial Services includes over 3,500 credit unions and 30,000 ATMs nationwide.
One great thing about credit unions is that they are a completely regulated type of financial institution. In the United States, federal credit unions are overseen by the National Credit Union Administration while state-level credit unions are watched over by the states’ credit union regulation agencies.
Remember that all federal credit unions are insured by the National Credit Union Insurance Fund (NCUSIF), similar to how banks are insured by the Federal Deposit Insurance Corporation. State credit unions may or may not be insured by the NCUSIF, although many states also have their own credit union insurance fund, while some state credit unions also rely on private insurance.
Before you join any prospective credit union and start making any contributions, it is important that you first study in detail the products, services, and level of protection that they offer. This way, you can fully take advantage of the benefits that these financial institutions afford.