8+ Benefits of Credit Unions | Banking Advice 2022

Kurt Hemry spent six years as a consultant in the banking industry, but he spent more than 40 years as a credit union member.

“(My wife and I) have been banking at a credit union since we were first married,” said Hemry, president of consulting firm Ironwood Wealth Consultants in Portland, Oregon. That was 41 years ago, and while Hemry had his business account at a bank, he never saw a reason to move his personal account away from a credit union.

Credit unions, unlike banks, which are owned and operated by their members, are often misunderstood as monopolistic places with limited services. In reality, however, most Americans are eligible to participate, and they offer an increasingly diverse range of services, including free ATM use, electronic banking, loans, and savings accounts. interest rates.

Plus, credit unions come with these five perks:

Here’s more about credit union benefits.

Credit unions and banks are fundamentally different in their structure. While banks may be publicly traded by profit-seeking shareholders, credit unions operate as a non-profit organization. Everyone with an account at a credit union has the right to vote on the board of directors, which can influence decisions like expanding a business area or adding new services or products.

There may also be a financial interest to this ownership. “Earnings are typically returned to members in the form of bonus dividends,” says Ken Tumin, founder of banking website DepositAccounts.com. This dividend can be automatically deposited into the member’s account at the end of each year.

Since credit unions are nonprofit organizations, they often keep fees lower and offer higher interest rates on savings products. “In general, credit unions tend to have higher paying CDs and savings accounts,” says Hemry.

According to the government’s National Credit Union Administration, credit unions paid an average of 2.35 percent for a $10,000 certificate of deposit over the five years from December 2018. banks are paying an average of 1.89 percent. Interest rates are also better on loan products. 48-month auto loans came with an average interest rate of 3.64% at credit unions in December 2018 compared to 5.43% at banks.

Many credit unions also have an interest rate limit. For example, federally chartered credit unions have an 18 percent limit that applies to all loans, including those for cars and credit cards. That limit doesn’t apply to bank products, which can charge significantly higher interest rates, especially on credit cards.

Some consumers turn to credit unions for peace of mind. “A lot of times people think credit unions are safer than banks,” said Dawn-Marie Joseph, president of Estate Planning & Preservation in Williamston, Michigan.

In fact, both banks and credit unions offer a similar level of protection. While bank deposits up to $250,000 are insured by the Federal Deposit Insurance Corporation, credit union accounts receive similar insurance through the NCUA. Credit unions may also extend similar protection to retirement accounts such as IRAs and trust accounts.

Like banks, credit unions can form, but that usually means they will merge with another credit union. No matter what happens, members are protected through NCUA insurance. If a federally insured credit union fails, members typically receive payment for their deposits within a few days.

Not all credit unions are created equal. While some credit unions are large and operate nationally—for example, the Navy Federal Credit Union has 8 million members—many are very small. “They might have a branch,” Tumin said.

To make services more convenient, more people join the network of ATMs and shared branches. These allow customers to complete transactions at other credit union branches and ATMs. “That could make up for the small size of some credit unions,” noted Tumin. To find credit unions participating in a shared branching network.

Voting rights

Credit unions may also have interests beyond the bank. “Since (they) are executive members, it seems like they’re more invested in the community,” said Joseph.

For example, Our Credit Union in Royal Oak, Michigan, hosts an annual golf outing to fund its charity, supports families in need during the holidays, awards scholarships to teenagers. local, participate in charity walks and more. Other organizations offer special services to members, such as the American Airlines Credit Union, the American Airlines support organization, and the American Eagle Family Fund for emergency assistance to current and former airline members. air.

Unlike banks, which are open to anyone, credit union members often have to meet certain standards. For some smaller organizations, membership may be limited to those who work in a particular profession or belong to a certain church. Larger credit unions can base their memberships on geography and are open to anyone who lives or works in a particular city or state.

Good Customer Service

In customer satisfaction surveys, credit unions consistently outperform banks. Consumer Reports, for example, discovered that 96 percent of credit union members were “extremely satisfied” with their credit union. Because credit union customers are also owners, these institutions are highly focused on providing customer service in a way that not every bank is willing or able to match.