Many people are still unaware of the fact that a credit union can help them save a lot more money than traditional savings account in a bank. The main difference between banks and credit unions is that banks are owned by external investors and are for-profit businesses while the customers themselves own credit unions. Hence, banks always look forward to pleasing their investors that often puts the customers in a crunch.
Credit unions, on the other hand, have the sole aim of serving their members. It is the reason why people with credit unions get prompt customer service without facing hassles about service fees, unfavorable interest rates, etc.
The customer-centric business model that credit unions follow makes them a popular choice as compared to a bank. But there is a slight catch when it comes to joining a credit union. Not everyone can be a part of a credit union because, unlike banks, they are not legally allowed to serve the general public.
Membership in a credit union is limited to specific groups. You’ll only be allowed to join a credit union if you belong to a particular industry, employer, and organization or live in a particular community. But, that doesn’t mean you can’t be a member. Most credit unions extend eligibility to immediate family members, so if any relative of yours is a member of a credit union you can easily get in. Similarly, another easy way is to join a charitable organization by paying the one-time fee. Credit unions often offer eligibility to members of some philanthropic organizations so it is another way you can get in after registering.
Joining a credit union with excellent customer service and top-notch facilities sounds like a dream. However, the critical question is whether joining a credit union help you save more money or not.
Let’s explore how a credit union can help you to make smart financial decisions along the way.
1- Higher interest rates
Most people have a savings account in the bank due to the attractive interest rates. Both banks and credit unions earn in the same way- by loaning money to customers. In exchange for using your money for these loans, both banks and credit unions pay interest. As long as this cycle of collecting interest from borrowers, disbursing a part of it to depositors, and covering the organization’s expenses runs smoothly- it can stay in business.
According to research by Bankrate.com, credit unions pay more interest to their members than banks because in reality, the profit belongs to them rather than shareholders. This is why, joining a credit union can help you get many benefits like higher interest rates, lesser fee, and the lower interest rate on loans.
In fact, the better interest rate is one of the primary reasons why credit unions are gaining popularity.
2- Lower loan interest rates
If you are planning to decide to apply for a loan, then a credit union might offer you better rates. According to a report by the NCUA (National Credit Union Administration), the average interest rate for credit union auto loan was 2.67% APR while banks offered a rate of 5.09% APR. On the other hand, credit union credit cards charged an average rate of 11.62% APR as compared to the 12.65% charged by banks.
You can save tons of money through a credit union by manageable monthly payments of your loans and paying less as compared to banks.
3- Lower customer service fees
Another way in which you can save money, in the long run, is the customer service fee. If you compare the service charges of a credit union versus bank fee, you will notice a big difference. Credit unions also make you sign up for overdraft protection, which means you’ll definitely save money on service charges. The main point is to do your research and find a credit union offering the best customer service on a budget.
4- No minimum balance required
One of the biggest turnoffs of having a savings/rewards checking account in a bank is that they require you to maintain a minimum balance. On the other hand, credit unions don’t have this requirement- even for rewards checking members.
5- Offer one-on-one solutions
A credit union may be willing to have you on board even if you have a poor credit history. The loan officers will work with you to find an optimal solution. Whether it is a mortgage or an auto loan, a credit union may be the best option for you to use immediately.
Whether you are late to the savings club or a seasonal saver, joining a credit union can help you save money from day one. If you already have a membership of a credit union, then make the most of it by reaping the benefits of the facilities being offered by them.
Do you prefer credit unions over banks? Share your experiences in this regard with us in the comments below.