Are you looking for a financial institution that aims to help its members? If yes, you may consider joining a credit union, which seeks to serve its members by providing credits at a lower fee and rate and offering other financial services.
What is a credit union?
According to the World Council of Credit Unions (WOCCU), credit unions operate in 105 countries all over the world. These countries include the United States, Canada, South Korea, Colombia, the Philippines, Brazil, Australia, Ecuador, Thailand, Ireland, Mexico, and Kenya, among others. These countries have the most credit union members.
A credit union is owned and managed by its members. If you make an initial deposit to a credit union, you are considered part owner of this financial institution.
A credit union operates as a bank. However, it is considered a nonprofit financial organization, unlike a bank that generates profit for its stockholders and provides returns to its investors. Both credit unions and banks seek to please their members or customers.
A credit union could offer a standard savings account, checking account, and money market account. It could also offer personal loans, home equity loans, mortgage, and car loans.
The Advantages of a Credit Union
A credit union is beneficial to its members in many ways. If you become a member of this institution, you will enjoy the following privileges:
- Reasonable interest rates
A credit union offers high interest rates on savings account, time deposit, and CDs. Meanwhile, you will be surprised at its low interest rates on various loans. Moreover, you can avail of discounts if you decide to pay your mortgage in whole at a certain period. With low interest rates on loans, you can save a significant amount that you can use for other purposes. Regarding credit cards, a credit union offers low APR rates too, which is better than those offered by banks.
- Reduced fees
What is good with a credit union is it does not have a high charge on transfer fees. It does not even charge ATM fees. You can save money with these reduced fees; that is why a lot of people opt to open accounts on credit unions.
- Part ownership of the credit union
Members who make an initial deposit to a credit union are considered part owners. The benefit of such is receiving low interest rates and fees, given that a credit union is a nonprofit financial institution.
- Flexibility
Even if you have a poor credit record, a credit union is willing to help you particularly if you are applying for a loan. They will choose a loan appropriate for your needs and provide programs that could help you control your expenses. You must apply in person, though, to explain your situation.
The Disadvantages of a Credit Union
Although a credit union offers many benefits, it also has the following disadvantages:
- Limited branches and ATM locations
Understandably, a credit union has fewer branches and ATM locations than banks. It means you may have a hard time looking for a branch or ATM, especially if you travel a lot.
- Membership eligibility restrictions
Banks are open to the public for those who want to open an account. Meanwhile, the credit union has membership eligibility requirements because the federal law has imposed a restriction on its membership. To be a member of a credit union, you need to be a member of a particular group, such as church, school, employment, and community groups. However, there are also credit unions that are open to most employees of certain companies and family members of employees and retirees. An example is the Empower Federal Credit Union. To know more about the details of their membership, check out their website at empowerfcu.com.
In challenging times, a credit union can be of great help to your finances with its low rates and fees. Consider the above pros and cons of joining a credit union to help you make a sound financial decision.
