Many credit unions serve anyone that lives, works, worships or attends school in a particular geographic area.
Membership in a group, such as a place of worship, school, labor union or homeowners' association may qualify you to join. Members often have shared interests and appreciate participating in an institution designed to help other members. The cooperative structure of credit unions creates a cycle of mutual assistance towards the common goal of the financial well-being of members.
Text-Only Version. What is a Credit Union? Credit unions are owned and controlled by the people, or members, who use their services. One of the simplest distinctions that can be made between banks and credit unions is their organizational status, also known as their tax status. Banks are considered for-profit businesses, while credit unions are set up as non-profits. Also, banks can be privately owned or publicly traded, while credit unions are member owned. Credit union participants are called members, while bank participants are customers.
People need banks and credit unions to conduct common banking operations, as well as to lend money for personal needs, automotive purchases, mortgages, and business ventures. However, the cost of these services marks another point of distinction between banks and credit unions. Banks offer lower rates of interest on savings and have higher fees, while credit unions pay more interest on savings and have lower fees. Online credit unions can pay even higher rates of interest on savings.
Depending on the credit union, the fees for banking errors, such as a bounced check, may be lower than a bank, as well.
National and global banking companies often have large budgets for technology, unlike many small credit unions. However, it's possible to find national credit unions with digital banking options that provide most of the services you need.
Make sure to ask credit unions about their mobile banking technology and check their websites for simplicity and services. Larger banks may subject you to bad customer service. Rather, they are enforced by national boards of directors and executive leadership. Credit unions look to serve their membership and tend to be more flexible when it comes to customer needs. Votes regarding customer service issues are influenced by the account owners—the members of the credit union—who have equal voting rights.
Also, credit union membership is smaller and better known to local branches, which helps facilitate establishing relationships with branch managers and loan decision-makers. That can make it easier to get the loan you need. Of course, some banks make consumer outreach a goal so you may also find good personal service at a local bank branch.
Major banks typically have more locations to provide direct service to customers. Credit unions tend to be in much smaller towns and cities, with fewer branches. To offset this disadvantage, credit unions have formed a CO-OP Shared Branch network with more than 5, shared branches nationwide. Connexus, for example, allows you to search for branches online.
Credit unions typically offer lower fees, higher savings rates, and a more hands-and personalized approach to customer service to their members. In addition, credit unions may offer lower interest rates on loans. And, it may be easier to obtain a loan with a credit union than a larger impersonal bank. In addition, members of credit unions play an active role in it. Credit union members get to vote on policies and decisions made by the financial institution. Most credit unions cannot compete with banks when it comes to convenience access to ATMs and branches and technology like mobile banking.
Many credit unions cannot compete with online banks in terms of technology. Credit unions may offer lower interest rates on loans, but the array of financial products may be limited in scope compared to big banks. Credit unions will likely offer you lower-cost services and better interest rate options for both loans and deposits. Banks will likely provide more services and products, as well as more advanced technologies. You'll need to take factors like these into consideration in deciding which type of institution will best serve your needs.
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