Banks aren’t your only option anymore. When it comes to saving money, finding loans, and other money-related needs, people want more choices. That’s where credit unions come in. Though they’re similar to banks, credit unions operate differently. They also serve different people, offer different benefits, and have several other distinctions. So, what exactly is a credit union? Read on!
What is a Credit Union?
Just like a bank, a credit union is a financial institution. As such, it offers financial services to its members. However, there are a few things other than finances that define a credit union. Credit unions are also nonprofit organizations. This means that instead of pocketing any surplus money, they invest it right back into the services that help their members. Many people prefer the nonprofit format because it adds a layer of trustworthiness and altruism to banking. When people use credit unions, they can indirectly help their fellow credit union members.
Credit Union Membership
Who can use a credit union? It depends on the credit union. These organizations have specific qualifications for membership. Qualifications vary from one credit union to the next, but here are a few examples of membership requirements:
● Living in a certain city, county, or state
● Belonging to a certain group, fraternity, or faith community
● Being in a certain industry
● Working for a specific company
● Being a part of the military
Many credit unions will also allow its members’ immediate family to join. If any of your family members already belong to a credit union, you may be able to use that credit union even if you don’t otherwise meet the requirements.
What Does a Credit Union Do?
Now that you know the broad definition of credit unions, let’s take a closer look at what credit unions do. You know that credit unions provide financial services, but what does that mean? Here are some of the services that credit unions can offer.
Checking and Savings
Virtually every credit union will offer checking and savings account options, just like a regular bank does. Accounts will have many of the same benefits that banks have, too. For example, you can get a checkbook and a debit card if you open a credit union account. You can also use ATMs and any of the other services that a bank will let you use. However, depending on the size of your credit union and its resources, you may not have access to conveniences like mobile apps. That said, plenty of credit unions do offer these conveniences, so if they’re important to you, look around for a credit union that provides them.
An ATM card lets its user draw cash out of an account, but it only works for cash retrieval. The card can’t be used like a debit card. Some parents prefer that their kids start with ATM cards instead of debit cards because it prevents overdrafts. It also encourages the user to keep a closer eye on their own funds because cash is tangible. As a matter of fact, some adults with ADHD and similar conditions prefer ATM cards for this reason. A lot of credit unions offer ATM cards. If you or your kids could benefit from one, ask potential credit unions if they offer this product.
A lot of credit unions also offer investment opportunities. Obviously, a savings account provides the simplest way to invest money. However, many credit unions also offer other forms of investment such as CDs, IRAs, index funds, and college savings plans.
Credit unions also offer all kinds of loans. If you need a personal loan, auto loan, business loan, or virtually any other type of loan, a credit union can provide what you need just as easily as a bank can.
As we mentioned earlier, some credit unions don’t offer the same tech conveniences that banks offer. However, many of them do, and that includes online banking. Users can move funds between accounts online, keep up with their balances, and enjoy the overall convenience of online banking.
We could go on for pages about the services that credit unions offer. Basically, if a bank offers a service, you can probably find a credit union that offers the same service. It all depends on the credit union, though, so make a list of the services that you need before you commit. Check out the websites of different credit unions to see what they offer. If they have everything that you need, then they’re probably a great fit.
Credit Unions vs. Banks
Now, if credit unions offer the same services that banks offer, then what really sets them apart from banks? Why do so many people choose credit unions over traditional banking? Well, there are a few key differences. First of all, we already mentioned that credit unions are nonprofit organizations. Banks, on the other hand, are for-profit businesses. Whether you use a bank or a credit union, you benefit the owners of that service. For a bank, those owners are just a few people. When it comes to big banks, a lot of people dislike the idea of making the owners richer. On the other hand, a credit union is owned by its members. When you use a credit union, you have to purchase a membership first. This means that you now own a portion of the credit union. When you use a credit union’s services, you benefit yourself and the other members of the union.
Pros and Cons
Of course, banks and credit unions both come with their own pros and cons. Still deciding between a traditional bank and a credit union? The next several paragraphs may help. Let’s take a closer look at the pros and cons of credit unions.
Pro: Lower Fees and Higher Interest Rates
Credit unions tend to offer lower fees and higher interest rates than banks can offer. As stated earlier, credit unions exist to benefit their members. As a result, they can offer these financial incentives. Some credit unions even offer rewards, such as cashback opportunities.
Con: Qualifying for Membership
Of course, qualifying for credit union membership isn’t quite as easy as opening a bank account. Credit unions, like we said, do have specific qualifications for membership. That said, don’t let membership qualifications keep you from choosing a credit union. With the amount of available membership categories, you’re bound to find the one that fits you. Start by searching for “credit unions for [your state] residents” or “credit unions for [your profession].” Finding the right fit will probably be much easier than you think it will be.
Pro: Easier to Get a Loan
For most people, it’s much easier to get a loan through a credit union than it is to get a loan through a bank. It all comes back to benefitting the members. Part of benefitting the members includes providing attainable loans. A bank owner, on the other hand, will want to know how you can benefit the bank’s bottom line. That’s why some banks can make it almost impossible to get a loan. With a credit union, you’ll have a little more leeway if you have bad credit or limited collateral.
Con: Services Depend on the Community
When you use a traditional bank, you’re basically guaranteed to find every service that you need. Looking for investment opportunities, online banking, safety deposit boxes, and other services? A bank will have what you need. A credit union, however, may not have exactly what you’re looking for. Credit unions offer the same basics, but beyond that, different credit unions offer different services. Once again, credit unions serve the needs of their members. If the majority of a credit union’s members don’t need a certain service, then they won’t offer it. That said, there’s a good chance that if you fit the membership requirements for a credit union, that credit union has what you need. You fall into its key demographic, after all. Many of your community members are going to need the same things that you need. You should always do your research first, of course. If you spot a credit union that looks promising, take some time to scroll through the website. Make sure that it mentions the services that you’re seeking.
Pro: Serving the Community
On the other hand, the fact that credit unions serve specific communities is absolutely a good thing for those communities. Your credit union will tailor its services to your demographic’s needs. Often credit unions will provide very specific services for its membership. For example, if your industry requires a lot of traveling, then your industry’s credit union will probably provide specific financial protection to prevent fraud while you’re out of town.
Not all credit unions can provide the same convenience that banks can provide. This is especially true when you compare smaller credit unions to larger banks. Big banks have lots of different branches, ATM locations, technology, and other conveniences. For those who need this kind of convenience, banks are a great choice. Credit unions, especially the smaller ones, don’t have the same options. However, some of the larger credit unions do have different branch locations and other conveniences. Industry-specific credit unions especially tend to have a lot to offer. It all boils down to your needs and how these services can meet them.
Pro: Customer Service
Credit unions almost always provide better customer service than banks provide. Again, these organizations exist to serve their members. This usually means a more personal touch. When people walk into a credit union, they feel like they matter. They get their questions answered quickly, and they’re generally treated with respect.
How to Get Started
Thinking about joining a credit union? Whether you’re looking for a business loan or just need a place to handle your banking needs, a credit union is a great choice. Getting started at a credit union can be a little more complicated than getting started at a bank, but it’s not difficult. Here’s what you need to do.
Finding Your Credit Union
Of course, the first step is finding the right credit union. If you’re struggling to narrow it down, start by thinking about your biggest needs and the biggest aspects of your identity. For example, if your industry and your job are factors in most of your decisions, then you might start by searching for credit unions within your industry. If your living environment matters more to you, then look for a credit union based on your city or state. If you’ve served in the military, then you can look for a credit union for military members. Then, start your search based on those terms. A simple search for “military credit unions” or “New York credit unions” can take you far. Remember that you might also join a credit union based on your family’s membership. If any people in your family belong to a credit union, go ahead and research that credit union. It may have everything that you need.
Buying a Share
Next, you’ll apply for membership. If you meet the credit union’s requirements, you can buy a share. How much will a share cost? It depends on the credit union, but a share can be as low as $5.
Ready to Go
Once that’s done, you’re ready to start banking with your credit union. You can open an account, apply for a loan, and take advantage of the other services that your credit union offers. Once you buy your share, you’re officially a member and have partial ownership of your credit union.
Making It Easy
Need more help or credit union information? Want a fast and easy way to find a credit union that will meet your needs? That’s where Bundlefi comes in. At Bundlefi, we match businesses with the community banks and credit unions that will serve their needs best. If you’re ready to learn more, get in touch with us at Bundlefi today. We’re always ready to help and answer your questions.