6 Benefits of Using a Credit Union

Most people previously associated banks with trustworthiness, longevity, and stability in the financial world—at least until recently. With the shake-down of the financial markets and the collapse of many financial institutions, many of us question whether banks are the best way to store, transfer and save money.

Credit Union Benefits Overview

Credit unions are free to make decisions to benefit their members rather than seeking to please stockholders, who may have different interests than the members' interests. As a result, credit unions can offer members lower rates on loans, credit cards, and other products, higher savings rates, and lower fees. Members also benefit from insurance on funds up to $250,000, financial education tools, and significant community involvement.

1. Better Rates on Savings Products

Credit unions strive to offer great rates on member savings accounts and often best bank interest rates where certificates of deposit (CDs) are concerned, in addition to money market accounts. However, you should shop around for the best high-yield savings accounts to compare returns for other products.

2. Lower Rates on Borrowing Products

In general, credit unions charge lower interest rates than banks on a wide variety of products, including:

• Credit cards
• Fixed-rate mortgages
• Adjustable-rate mortgages
• Used car loans
• New car loans
• Home equity loans
• Personal loans
  

While you should always shop around and compare rates, starting your loan search at a local credit union may be a real benefit.

3. Lower Fees

Credit unions charge lower fees than other financial institutions, on average. This may include lower or nonexistent fees for account maintenance or fee refunds for everyday banking activities such as ATM withdrawals.

This doesn't mean you won't be charged fees for some services, such as wire transfers or overdrafts. However, fees still tend to be lower at credit unions. Overdraft and nonsufficient fees are 13% to 19% lower at small banks and credit unions than at large banks, according to 2021 research from the Consumer Financial Protection Bureau.

4. Member-Owned Financial Services

Credit unions often consider themselves "financial cooperatives" rather than financial institutions. So perhaps the most outstanding feature of credit unions is that they are member-owned and member-run, with opportunities to vote for a volunteer board of directors elected by members. This board helps run the credit union.

5. Up to $250,000 Insured

Up to $250,000 of your funds in a credit union account is insured by the National Credit Union Share Insurance Fund, as managed by the National Credit Union Administration (NCUA). The $250,000 standard insurance amount is per owner, per insured credit union, for each account ownership category.

6. Perks and Free Education

Some credit unions offer products such as individual health insurance and financial advisory services. Most credit unions focus on community enrichment and financial education, with many offering free classes or other educational services to the community, including debt or budget counseling, in-school credit union branches, and first-time homebuyer programs.

The Bottom Line

If you're frustrated with long lines and unresponsive customer service, a credit union might be the best place to put your money. It's tough to beat a friendly, community-focused financial institution offering lower fees and better interest rates. Compare shopping with traditional and online banks and make sure the credit union you are considering offers the best rates for the service you need.