Did you know there are currently 6,293 credit unions operating in the US? Unfortunately, many do not know how they work and forgo them for banks and other lenders. But do you know how they can benefit your finances?
Credit unions are known for better rates, though not anyone can use them. Read on as we ask the question “What is a credit union?”
What Is a Credit Union?
A credit union is a type of financial institution, existing in the same realm as banks. The difference is that members of the union own the company. Working as not-for-profit companies, they aim to serve their members rather than attempting to earn a profit for shareholders or private owners.
Who Can Join a Credit Union?
The caveat is that you must be a member of a credit union to benefit from its banking services. The requirements for entry vary depending on its organizational structure. However, it often comes down to the following factors:
- Your employer
- Existing family members
- Geographic location
- Membership in a group or organization
How Do Credit Unions Differ From Banks?
The way they differ is in their operations. When you put money in a bank, the profit made from it goes to shareholders. Therefore, they will offer high interest rates on loans with low rates on savings, to increase profit.
Credit unions are member-owned, meaning when you deposit money you become both an owner and a customer. Money deposited by you and other members is provided to offer banking services to other members of the union. Profit is taken and used to give better loans and rates, instead of going to shareholders’ pockets.
The only downside to this is that credit unions often offer a smaller range of products. You may have fewer choices when looking for credit cards or fewer loan terms to choose from.
Some online banks may also offer better rates than credit unions, as they do not have the operating overheads of brick and mortar establishments. They may also have certain rules regarding international transfers. You can continue to use services such as www.transferly.com in conjunction with them for the best service.
Benefits of a Credit Union
Credit unions tend to offer much better deals to their members than banks and other lenders would do. For example, you may get lower loan rates or better savings rates.
In addition to this, fees are often fewer than you get in banks. They will still be charged, but if you compare them to costs for banking services you will notice they are often lower.
As they are often smaller organizations, many people like the personalized service that comes with them. When you call a major bank, you are often dealing with people spread out over a big organization, often across the world. With a union, you will speak to individuals who build a relationship and understand your wants and needs.
What Credit Union Should I Use?
Now you can answer the question “What is a credit union?” you need to decide if they are a good option for you. Which to use will be dictated by your circumstances. However, if you want lower rates but don’t mind less choice and can join, then they will be a benefit.
If you enjoyed this article we have many more to help. From finance to fees, let us help organize your banking and money in the coming year.
