What Is A Credit Union And Why Should You Join One?
Just like a bank, a credit union is a financial institution too. The only difference is, while you don't control what a bank does with the money you give to them, the members of a union own the union they give their money to.
Because of this reason, a credit union solely operates for the purpose of providing benefits to its members.
What could it mean for the member you might ask?
Here's a breakdown:
- A more attractive saving rate
- A reduced rate for loans
- Decreased fees
But with that said, you need to meet specific requirements to join one. These rules differ on the union you're thinking of joining because there are different ways the members might decide to organize one.
Here are a few considerations you need to make.
Comparing a Credit Union To A Bank
The day to day operations of a bank and a credit union are similar, but the purpose of existence is different. When a person opens an account in a bank and deposits their money, they are treated as customers. But the sad bit is that a bank's primary concern is to maximize its shareholders' wealth.
Typically, a bank can give you a higher interest on a loan and a lower interest rate on your savings when compared to a credit union. This wide difference allows the bank to make a profit from your money by lending out your money at a higher interest rate than the ones they're offering to you.
The difference in interest rates is how a bank earns money.
Because a credit union is owned by its members, its existence is unique. You're not only a customer of a credit union but a part-owner too. The money you deposit is used to give loans to other union members, just like a bank.
This way, the money that would've been normally considered profit is used to help other union members. A credit union also offers a more attractive rate on a saving product and a decreased interest rate on a loan product. You may have to pay a lower fee if you're a part of a credit union.
Why you Must Join A Credit Union
A credit union gives its members a more personalized experience. Since a bank is spread out and caters to a lot more customers, you might not control the dynamics of every decision you take. In a credit union, every decision-maker is close by, so you can directly communicate with the people who decide what happens with your money.
Moreover, a credit union can also offer a better interest rate on the savings accounts you decide to get compared to a bank. So if you're trying to ensure your money stays local, a union will give you the best chance to do so.
Even though a bank can offer you greater flexibility, a credit union might be the right choice if you're looking for a lower interest rate for loans. And remember, it's not essential to choose between the two; you can also have an account in both of these financial institutions.