5 Financial Benefits to Joining a Credit Union

Credit Unions can offer customers a more personal banking relationship along with lower loan rates.

Credit unions are sometimes misunderstood, often seen as small financial institutions with limited services. But there are many benefits to joining a credit union.

Credit unions tend to be smaller but that doesn't mean credit unions offer less financial services of large banking institutions.

The main difference is that credit unions are not-for-profit organizations, owned by credit union members (depositors). Each member, regardless of how much money they have on deposit, has one vote in electing board members.

Bank customers (depositors) have no ownership interest in the institutions. Banks are for-profit business corporations owned by private investors and governed by a board of directors chosen by stockholders.

Five reasons to join a credit union.

1. The customer comes first. Credit unions exist to help people, not make a profit. Don’t miss out on the benefits of joining a credit union. You may be pleasantly surprised at what your local credit union has to offer.

2. Higher Savings Account Rates. Credit unions can generally offer higher savings rates than the national average that is current 0.09 percent according to the Federal Deposit Insurance Corp. That means that your money grows faster.

Credit union savings accounts can be tailored to a member’s needs. Most credit unions offer special goal-setting savings accounts that can be used to fund big purchases. You’ll find higher interest rates than on other savings accounts, no fees and low minimum balances.

3. Lower rates on credit cards and loans. On average, credit unions offer lower rates on credit cards and loans. The National Credit Union Administration reports that five-year loans for new cars at banks have an average interest rate of 5.04 percent, compared with 3.57 percent for credit unions. Because credit unions exist to serve their members, income from the credit union is returned to members through offering higher interest rates on deposits and lower rates on loans.

4. Credit unions offer second chance banking. People with a negative banking history due to ChexSystems, Early Warning Services or bad credit can often open checking accounts at credit unions. Although there are a handful of banks that don't use ChexSystems, there are many credit unions that offer second chance banking where customers are given an opportunity to rebuild banking history and get back in the good graces of the banking industry.

5. Money management tools. Because credit unions are member-oriented, they can teach you how to manage your money. They are a top source for financial information offering seminars and information on money management topics.

Do your research to find the right credit union.

You don't have to worry about the safety of your money in a credit union. Deposits are insured the same way they are at banks. Credit unions are insured by the federal National Credit Union Administration, which provides the same protections that the Federal Deposit Insurance Corporation applies to banks – insurance coverage on deposits up to $250,000.

Before you commit to a credit union or a bank, do your homework and research. If personal service, better interest rates, and lower fees are more important to you than a credit union may be the choice for you.

Find a credit union in your area.