11 Benefits of Banking with Credit Unions Instead of Banks


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Credit unions remain an often overlooked and misunderstood alternative when it comes to consumer banking. Only about 16 percent of Americans use a credit union as their primary financial institution, even though there are numerous benefits associated with using one instead of a traditional, for-profit bank. Lower fees, better rates on loans, and bigger savings are just some of the reasons to consider credit unions.
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One of the biggest differences between credit unions and banks is the ownership structure. Traditional banks are for-profit businesses; credit unions are not-for-profit financial cooperatives owned by the people who bank there. This translates into direct benefits for members. "Because credit unions are owned by members, they are more motivated to use their income to provide better benefits for members rather than give dividends to shareholders and bonuses to executives," said Sharon Marchisello, author of the ebook "Live Cheaply, Be Happy, Grow Wealthy."
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Again, being member-owned has benefits: The rate of return on accounts is generally higher than at a traditional bank. In other words, you stand to actually make money on a savings account, something unheard of at for-profit banks these days (unless you have substantial sums of money deposited.)
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Many credit unions offer accounts sans annoying service charges. For instance, at Alliant Credit Union -- rated one of the best credit unions in the nation -- there are no monthly service charges on its High-Rate Checking or High-Rate Savings.
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Credit unions also offer far more attractive terms on credit cards, Marchisello notes. The Alliant Visa Cashback Signature Card gives 2.5 percent rewards on all purchases, whether it's groceries, gas, restaurants, or anything else. Many traditional bank cards give this level of reward only in one or two categories. In other words, a credit union card could mean no more juggling multiple credit cards to make the most of rewards points programs.
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Credit unions are often considered friendlier and more human than the cold, formal atmosphere of big banks. Because credit unions are typically smaller organizations, employees are able to get to know members and focus on their needs. "The same employees work at my local branch over a long period of time. It is great to see a friendly face when doing my banking," said David Schein, director of graduate programs at the Cameron School of Business at Texas' University of St. Thomas.
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A personal touch can count for much more than a smile. If you have a spotty credit history, a credit union may be the best place to seek a mortgage or other loans. With more personalized service, credit unions are generally willing to work with members to help them qualify for loans.
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Credit unions are also known to offer perks that extend beyond checking, savings, and credit cards. Some offer individual health insurance, financial advisory services, or workshops on financial topics. Budget lifestyle blogger McKinzie Pack says her credit union, Shell Federal in Texas, offers such benefits as discounted tickets to baseball games, museums, and theme parks.
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Accounts at traditional banks are known for requiring a minimum balance and levying fees if an account drops below it. That's not the case at the vast majority of credit unions. Connexus Credit Union in Wisconsin has no minimum checking balance, but has accounts offering 1.75 percent and 1.35 percent interest.
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It's a misconception that credit unions don't have many ATMs. Some band together to create ATM networks, such as California's CO-OP, with nearly 30,000 machines -- more than many banks -- that include some in locations such as 7-Eleven, Circle K, Costco, and Publix. Alliant Credit Union, meanwhile, has more than 80,000 ATMs in its network. It's also worth noting that many credit unions reimburse for charges incurred for using out-of-network ATMs, something big banks rarely do.
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Because many credit unions are created to serve small markets, that service can be tailored to the needs of a community or group. As a result, credit unions often provide services that big banks can't or don't want to provide. For example, there are church credit unions that open after church on Sundays so members can bank, such as the Abyssinian Baptist Church Federal Credit Union in New York City.
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Unlike like at big commercial banks where you're merely a customer, at credit unions you're a member -- a part-owner of a financial institution that gets voting rights and the ability to weigh in on how business is conducted.

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