In short, yes, credit union membership is in on a big secret. No matter the credit union, the kinds of work its members do or the location, folks who belong to a credit union are generally more focused on what their money can do for them. They might maintain more savings, have a stronger retirement portfolio or have a long-term relationship with a service representative.
If you’ve never thought about joining a credit union, why not? Well, if you’re like a lot of people you probably thought that credit unions were exclusive to certain professions or workers from specific places.
Maybe that was true once, but credit unions have evolved over time. Yes, some may choose to remain private, but the vast majority are public institutions that you can join with ease. Credit union membership has been growing since the pandemic, so what makes credit unions so special?
What Exactly Is A Credit Union?
A credit union is a financial institution just like a bank. But where a bank is for-profit and owned by investors, a credit union is not-for-profit and owned by its members. A credit union offers checking and savings accounts, credit cards, loans, mortgages and investment accounts, just like a bank. But where a bank is open to anyone, you often have to meet certain criteria to belong to a credit union.
The membership criteria vary, but can be restricted by where you live, where you work or whether you belong to a group or trade organization. For instance, you might think credit unions are a teacher thing because of the large number of education-related credit unions, or only for military members or state employees.
All kinds of people from all kinds of jobs belong to credit unions, so if you want to join one but don’t meet their criteria, keep looking. There is a credit union out there for you.
Advantages Of Credit Unions
There are a lot of advantages to belonging to a credit union. Generally speaking, the driving force behind everything a credit union does is to improve their members’ financial literacy and strengthen their financial well-being, all while being driven to serve their community in various ways. A credit union’s customers are also its owners and investors, and everybody benefits when the credit union succeeds.
That is not to say that joining a credit union will automatically better your finances; a credit union isn’t a fairy godmother with a magic wand. You have to put in the work to get results, but the very mechanism of a credit union puts you on better footing than your stick-with-a-bank peers.
Improving Financial Literacy
Many people don’t know how to manage their money well, such as the finer details of fees, interest rates, etc. When you belong to a credit union, financial literacy becomes almost second nature. For instance:
- Did you know that some credit unions require you to establish a savings account before you can open a checking account?
- Or that you earn more interest on that savings account at a credit union than you would at a bank?
Getting a loan or a credit card through a credit union is also not necessarily easier, but more borrower-friendly. You can benefit from everything from lower interest rates to extended borrowing terms, and your service representative ensures you understand all the fine print.
Rather than a bank, whose goal is pleasing its investors, a credit union only has its customers’ best interests at heart because at a credit union the members ARE the investors.
Strengthening Financial Well-Being
From promoting savings to giving you the financial freedom to chase your dreams, credit unions actually want you to succeed. They strive to provide reasonable interest rates on everything from car loans to mortgages to credit cards. They are able to achieve this by returning profits back to their members as high-interest savings accounts and low-interest loans because they don’t have to pay out to private investors.
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This is a win-win for members. Instead of having to adhere to a traditional bank’s lending model, a credit union sets its own guidelines for who is considered a good financial risk. You have easier access to short-term emergency loans, financial counseling, debt management and more.
Another bonus to credit unions is easier financial management. If your checking, savings, car loan mortgage and investment accounts are all with the same bank, it is easier to make adjustments to payments, transfer money between accounts and seek help when you need it. One-stop shopping, as it were.
Credit unions are a collaborative culture seeking to raise their members up, not keep them beholden to somebody else’s image of what finances should be.
Serving The Community
Credit unions serve their communities in myriad ways that banks can’t or won’t. The biggest way is through providing services to areas of the community that are drastically under-served by big banks. Because they are non-profit organizations, credit unions are more likely to serve their communities by:
- Providing low-interest small business loans
- Offering short-term, emergency or alternative loans to people in need
- Participating in a nationwide no-fee ATM network
- Offering affordable services for low-income communities, including check-cashing and auto loans
- Building relationships with other businesses to provide members with expedited, lower-cost or special services (e.g. car dealerships)
Credit unions also focus more on diversity and inclusion than big banks. When you belong to a credit union, you are eligible to vote for officers and board members, and you are also able to run for any open positions.
Credit unions represent the communities they serve, so you might find your credit union has board members from many nationalities, religions, income levels and more. Diversity in leadership manifests in other ways, too. Did you know that…?
- Credit unions have 10 times more women serving in CEO positions than banks.
- Credit unions make up 3 times as many Minority Depository Institutions as banks. According to the FDIC, a Minority Depository Institution is “any depository institution where 51 percent or more of the stock is owned by one or more socially and economically disadvantaged individuals.”
Credit Unions, Technology And You
Credit unions are not the answer to every financial problem, but if you value self-rule, want better financial standing and are committed to community-based institutions, then look at a credit union if you haven’t already. They are often on the cutting edge of customer service and adopt mortgage technologies like front-facing automation and customer interfaces before large banks.
Do you belong to a credit union? Would you finance your mortgage through your credit union? Why or why not?
Learn more about credit unions, mortgages, and how we can help!