Credit Unions: What Are They and Should You Use Them?

These days banks are under a whole lot of scrutiny.  Being blamed for giving out subprime mortgages to unsuitable candidates, resulting in people losing their homes, banks are not the most trusted and revered institutions at the moment.

In this economic crisis, banks are suffering as well but perhaps not like the everyday man.  To ease their suffering they have introduced new fees and increased existing fees.  And to top it all off, there have been many complaints customer service at big banks.  It seems that they are taking less and less of an interest in some of their smaller customers.

As a result, people have been dumping their banks and finding new alternatives.  Some people hide money under their mattresses, some give their business to smaller banks, and some people have joined credit unions. 

You’ve probably heard the words “credit union” being thrown around quite a bit these days, but you may not know exactly what they are other than an alternative to banks, but there are actually many other differences.  But remember that banks and credit unions generally do the same thing which is to manage your money and provide you with loans for big purchases like cars and homes.

The Upside

Ownership: The biggest difference between banks and credit unions is who owns them.  While banks are owned by shareholders who are looking to make a profit, credit unions are just that: unions and they are owned by their members.

Interest Rates: Because there is no one owner and no one really stands to profit, making credit unions not-for-profit organizations, they have the ability to offer higher interest rates on both savings accounts and on CDs.  It may not seem like a small increase in interest would be worth your time, but in reality this really adds up.  Interest is compounded and this means that you earn interest on interest making you even more money.

Fees: Ordinary banks have many different fees that they can charge you with.  One of these fees is for having too low of a balance.  Credit unions either do not have this fee or the minimum is much lower, like $5 or $10.

Service: Many more people are more satisfied with the customer service they receive from credit unions than from banks, perhaps because banks could be more self-serving because of their shareholders.

The Downside

Although credit unions certainly do have many different benefits, they have some drawbacks as well that have the ability to turn you off from credit unions altogether.

ATMs: Banks have many more ATMs than credit unions which means that cash is less accessible with credit unions.

Online Banking: Unlike big banks, credit unions have not developed their websites to be very usable.  You just can’t do as many things on most credit union sites.

Joining: Credit unions are exclusive.  Not everyone can join one because they are tailored to specific communities like teachers or the entertainment industry.

There is now strong polarity between banks and credit unions.  Credit unions are certainly not for everyone, but they offer many benefits that banks do not.  At the same time banks have benefits that credit unions do not.  Decide which you like better for yourself.

 

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