5 Benefits of Joining a Credit Union

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Personalized service can go a long way toward making your financial life more pleasant.

Key points

  • Credit union members are part-owners.
  • Joining a credit union can help members save money.

It's the small decisions that determine your financial path. Things like whether you carry a credit card balance or pay it off in full each month, live below your means by keeping housing costs to a minimum, and even where you choose to bank work together to determine how your money works for you. Whereas your grandparents may have kept their money behind the solid walls of their local bank, you have options. Among those options, a credit union is worth taking a deeper dive. Here are five ways joining a credit union can benefit you:

1. Credit unions give you a say

The old paradigm is this: A bank opens its doors, and customers pour in, making deposits, taking out loans, and making investments. The bank in question sets the rules regarding everything bank-related, from the interest rate they charge to whether customers must carry a minimum deposit.

Credit unions shattered that paradigm by making every member a shareholder. In other words, when you join a credit union, you become a part-owner, along with all the other people who have joined. As a shareholder, you help decide how the credit union operates, and there are several ways you can participate.

You can serve as a volunteer, get elected to the board of directors, or become an active voter as new proposals and ideas arise. Credit unions are genuinely democratic. It's one member, one vote. Even if you have $10 in your checking account, your vote matters as much as a shareholder who has hundreds of thousands.

The best part is you can be as involved as you want to be. If you don't have the time to volunteer or serve on the board, you still get a say through your vote. Later, if you find more time to spare, you can always increase your direct participation in credit union affairs.

2. Saves you money

Credit unions are not-for-profit cooperatives owned and operated by members. Because you're a member, it's you that the credit union wants to make happy. Banks and savings & loans earn money primarily through the interest they charge on loans and fees on everything from monthly maintenance to using an out-of-network ATM.

All of this is designed to make a profit for stockholders in the bank, to provide them with a return on their investment that will keep them happy.

When you're a member/shareholder in a credit union, any profit earned is returned to you through low interest rates on loans and higher-than-average rates on savings and other financial products, like money market accounts (MMAs).

Another way credit unions can save you money is by sharing an ATM network with other credit unions across the country. Today, there is a network of 30,000 ATMs you can access surcharge-fee, just for being a member of a credit union.

3. Protects your deposits

If credit unions sound less safe than traditional banks, nothing could be further from the truth. Accounts in most credit unions are protected by the National Credit Union Administration (NCUA) for up to $250,000 per member. NCUA was established by Congress in 1970 and has done a solid job of protecting credit union members. Just like the FDIC insurance that covers traditional bank accounts, NCUA insurance is backed by the U.S. government.

Important note: While most credit unions nationwide are covered by NCUA, a handful are uninsured. And a small percentage of others choose coverage from private insurers. If you prefer to stick with a federally-insured credit union, make it a point to find out which type of insurance a credit union carries before joining. Typically, the word "federal" will be somewhere in their name, but that's not always the case. Either give the credit union a call to ask which coverage they carry or check their website for the NCUA logo.

4. Makes life a little easier

Banking with a credit union is just as easy as banking with a traditional financial institution. It's possible to do just about everything from opening an account to making deposits from your smartphone, internet, or one of the 30,000 surcharge-free ATMs nationwide. In addition, credit unions have joined together to form a cooperative. What that means for you as a member is that you can conduct your banking business at any participating credit union location that carries the CO-OP Shared Branch logo.

5. Offers personalized financial service

While it may sound hokey, you're more than a number when you're a member of a credit union. Because you're a part-owner, the credit union wants to make you happy. That may result in something as simple as finding an alternate way to verify your income if you're self-employed and need a loan.

It may also mean offering you a short-term emergency loan or Payday Alternative Loan (PAL) when you're in a financial pinch. Some credit unions offer free financial counseling and debt management services. Don't be surprised if a representative from your credit union gives you a call to discuss ways they can help improve your financial life.

Credit unions are typically established by people with something in common. It may be a particular type of job, union membership, shared alma mater, or even the county in which they live. And you can be sure; there's a credit union for everybody. To find a credit union that's federally insured and fits your needs, NCAU provides this credit union locator.

Choosing the right financial institution may not seem like a big deal in the scheme of things. But banking where you'll be treated with respect, have access to the best interest rates, and are free to become involved makes managing your money a little easier.

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Rating image, 4.00 out of 5 stars.
4.00 stars
Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
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