Credit unions currently have more than 100 million members in the United States. With low fees and a community focus, they are an increasingly popular option for banking services. Cheapism.com looks at the difference between credit unions and conventional banks and how the former can save you money.
What Do Credit Unions Offer?
In general, the services offered by credit unions are the same as those found at banks: personal and business checking accounts, savings accounts, loans, mortgages, and other financial products such as certificates of deposit. The main difference is that credit unions are non-profit and cooperatively-owned organizations. All account holders at a credit union are members and part owners, not just customers. Members can vote for the board of directors and each member receives an equal vote regardless of account value. A credit union's primary objective is to help its members and the community with financial services, not to generate profits.
Credit unions rank well in studies of consumer satisfaction. The American Customer Satisfaction Index (ACSI) rates credit unions at 85 out of 100, higher than other financial services such as banks, insurance providers, and online brokerages. Claes Fornell of ACSI says credit unions provide superior service in nearly every area, from tellers to websites, despite charging lower and fewer fees. Credit unions score high on consumer trust as well. A 2015 study by the Temkin Group looked at 293 companies and 20 industries and found that credit unions tied for first place among U.S. consumers as the most trusted business organization.
Most credit unions offer no-fee checking and nearly three-quarters of all credit unions don't have a balance requirement. The minimum to open an account is usually quite low, as little as $5. Credit unions also offer online account services and mobile apps just like banks. A survey conducted by Malauzai Software in 2014 found that 65 percent of credit unions had an iOS app, compared with only 51 percent of banks.
Credit unions can be chartered at the state or federal level and in general there are few differences between federal- and state-chartered credit unions. Just like a bank, accounts at most credit unions offer deposit insurance up to $250,000, protecting account holders' money in case the organization goes under.
The Benefits of Joining a Cooperative.
As non-profit cooperatives, credit unions receive tax exempt status and pass the savings on to members in the form of higher interest on checking and savings accounts, free ATMs, better rates on loans and mortgages, and lower fees. In addition, credit unions return profits to their members via dividends, giving depositors a higher return and providing borrowers with discounts on their loans. On average, the Credit Union National Association (CUNA) estimates that members save $72 a year when compared with for-profit banks. Some specific services save members even more. Using average interest rates from 2014, CUNA calculated that financing a $30,000 car at a credit union costs a member $1,019 less than financing it at a bank. Because they're community-focused, credit unions are also often able to work with small businesses and individuals to secure loans when larger financial institutions won't extend credit.
One potential drawback of credit unions is their regional focus, limiting access for members who travel. However, more than 3,500 credit unions are part of the Co-Op Financial Services national network and share their resources. The 50 million members of these credit unions have access to more than 30,000 ATMs (9,000 of which take deposits) and 5,200 shared branches across the country. This puts Co-Op credit unions in line with large financial institutions like Bank of America in terms of access. Many credit unions also refund members when they pay fees to use an unaffiliated ATM.
Opening an Account.
Unlike banks, credit unions typically limit membership to particular groups: employees of a company, members of an association (such as an alumni or veterans' organization), fraternal affiliations, religious groups, or residents of specific areas. Some credit unions offer alternative means of joining; sometimes a small donation to a specific charitable organization is enough to qualify for membership.
Opening an account at a credit union is similar to opening a conventional bank account, and usually all that's needed is a short application and small initial deposit. There are several resources online for finding credit unions, including CULookup.com, MyCreditUnion.gov, and WalletHub's credit union locator. Another helpful resource, BankRate.com, rates credit unions and ranks the best credit union checking accounts each year.