I was sitting in a continuing education course last week when I was forced to listen to a sponsorship presentation by the COO of a local credit union. Given the fact it was late in the day and I was ready to go, I couldn’t help but wish this guy would hurry up and finish talking. But the more he talked about the benefits of joining, the more I became interested in finding out about all they had to offer. By the time he finished talking, I was convinced opening an account with this credit union was good for my business. In fact, I was convinced a credit union was good for anyone whether they were in business or not.
A credit union is a financial institution similar to a bank in most respects except account holders are considered members and the credit union is a not for profit institution. The members actually take ownership in the credit union. The for profit and not for profit status makes all the difference in the cost of services each institution offers. Although credit unions do require you to be a member, membership is typically fulfilled simply by opening an account. For occupational and community based credit unions, you may have to join an affiliated organization for a nominal fee in order to qualify for credit union membership if you don’t qualify under the common bond requirements.
The most notable advantages of banking with a credit union is the fact they tend to have much lower loan fees and usually lower interest rates. In addition, some advantages may also include:
– no minimum balance checking account
– no monthly service fees
– low rate auto and home loans
– debt consolidation loans
– competitive CDs, IRAs, and full service insurance
– easier to reach c-level employees
– locally owned and operated
Some of the disadvantages may include:
– less access to branch banking due to fewer number of branches
– may not offer as many services as your local bank
– technology may not be as advanced as larger national banks (mobile banking)
– may require a minimum balance to open a savings account
I would highly recommend visiting your local credit union and seeing what advantages and disadvantages they offer in comparison to your current banking institution. The two lists above are by no means exhaustive. One of the joys of banking is that you can have as many accounts as you need in as many institutions as you can afford. So you don’t have to close your traditional bank account to open an account with a credit union. You can hold both simultaneously.
One last point of reference, as a not for profit corporation credit unions reinvest their end of year profits back into their operations. This translates into money being reinvested back into the business of lending money. Plainly put, the profits are used to offer more services and loans to the credit union’s membership. A bank is a for profit corporation with the goal and intent of making as much money as possible for the shareholders at the end of the day. Which do you think has your financial goals in its best interest?