My first experience with a credit union was through my soldier friend who did his banking at a military credit union. The only thing I knew about it was that I didn’t know what the heck that was. Lack of knowledge can make us fearful of change, even making a change that would benefit us. And, in this case, it wouldn’t just benefit us as individuals, but as communities.
How Credit Unions Work
Banks and credit unions preform the same functions. You can deposit your money into a checking/savings account. You can get a loan for a home or schooling. The difference between a bank and a credit union is who owns it. With a bank, you have shareholders. When the bank makes a profit, they put that money in their own pockets. Credit unions are not-for-profits cooperatives. What that means is that when you deposit money into the bank, you, as a member, become a partial owner. So when that credit union makes a profit, it’s repaid to you instead of some shareholder. You can see those profits in the form of rebates, lower interest rates on loans, and even dividends.
How They Benefit the Community
When you use a bank, a large portion of your money goes outside of your community into various types of investments. When you use a credit union, that money stays in your community. It goes towards buying your neighbor’s house. Or financing a new small business. Or sending a kid from your local high school to college.
How They Benefit You
We’ve already discussed that as a member-owner, you’ll be getting your fair share of the credit union’s profits. You’ll also see more money in your pocket as average ATM fees are lower. So are overdraft fees. Not only will you get a lower interest rate on those loans, but you’ll also get a higher interest rate on your investments.
Financial Literacy Classes
Another awesome thing that over 1,200+ credit unions do is offer financial literacy classes. If you don’t know how to manage your money, it’s never going to matter how much you earn. Classes like these can be integral to building wealth or even just some stability. They vary greatly on subject matter, from classes for kids to classes for those about to enter retirement and everything in between. Many of these institutions even offer financial education material on their websites so you don’t even have to leave the comfort of your own home.
Concerns about Credit Unions
The biggest concern people bring up when they look at switching is, “What if I can’t get to my credit union’s ATM?” It’s a very valid concern; after all, the whole draw of a credit union is that it’s local. What if you’re travelling? Or just in a different part of town too far away from your branch?
The answer is that there are networks of credit unions, who have all agreed to accept each other’s members as their own when they use their ATM. So no crazy high fees to withdraw when you’re on that trip to the beach. A lot of credit unions even have these networks set up so that you can do in-person banking, like making a deposit, at any participating branch as if it were your own. Two great places to check out such networks are Allpoint and Co-Op Shared Branch. You can search there to see if your potential credit union participates. If not, ask them if they participate in any network like this. Even getting access to ATMS all over your own region would put them on competition with bigger banks, as many of those banks only have ATMs regionally, as well.
Are you a member of a credit union? If not, what factors would influence your decision to switch or stay put?
*This post is sponsored by Make Your Money Matter, in association with PSCU, though all views expressed are my own.*
I’ve been a member of a credit union for over 20 years. I’ve been really happy with their services. No monthly fees, plenty of no cost ATMs, free financial counseling. Overall it’s been a great experience.
Thank you for sharing your experience!
I’m still a bank backer, as I’m not a fan of the hoops that a credit unions make me jump through to avoid fees (e.g. – you have to use their debit card X times every month, or make X number of deposits into savings each month, to avoid fees). I love them in theory, but haven’t been happy with them in practice. With my bank, I get free checking with fewer strings.
But each credit union is unique, so there are likely tons of great options out there.
I guess it comes down to shopping around either way when it comes to that. My fiance’s old bank had a fee for if you wrote over a certain number of checks each month. I once banked with a savings account that charged me fees if I dipped below a certain amount. I’m with you…be a smart consumer and research before opening any account with any institution!
I’ve always found credit unions appealing, but I’ve spent the last six years traveling internationally and domestically for work and the two banks I’ve used have always seemed to have best options for that – especially international travel. I actually use Ally now and LOVE it – especially since they started allowing you to take a picture of checks to deposit them.
You’re definitely right though about credit unions giving you better interest rates.
I can totally see that. I imagine travelling internationally would be more challenging with a credit union…even most banks make it difficult.
Appreciate this post because I never really understood the difference, so thanks for spelling it all out so clearly!
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