What Exactly Is a Credit Union and Why Bank With One?

A credit union is a not-for-profit financial institution that exists to serve its members. The member community is defined by its bond of association; meaning that they either live in the same locality or share some other affiliation. Government workers, military personnel, and members of religious associations all have credit unions. These institutions provide financial services to their members that parallel what is offered by banks.

Credit Unions are community-run

The best feature of credit unions is that they are local. The branches, board, and members are all members of your community. The members of the credit union own the bank and run the board; as such, it is obligated to serve the community. When you bank with your local credit union, your money is invested in your community. You support local mortgages, local businesses, and local projects. This is a great way to help build the economic base of your community while keeping your money secure. Don't worry, credit unions are NCUA insured.

Credit Unions are cost-effective

Credit unions often offer higher interest rates on deposits than banks. They also offer loans to their members at discounted rates. They also often have less exacting qualification standards and are often actively involved in improving the financial health of their members. Working with a trained credit counselor can help you improve your credit score and save you money in the long run. Also, having access to financial products you might not qualify for with banks can help get you back on track.

Credit Unions have not-for-profit status

Credit unions are not-for-profit. Unlike banks where shareholders receive huge dividends from investments made using your money, credit unions are owned by the members. There is no small body of people who benefit personally from risky investments or selling faulty financial products. When you remove the profit motive from the banking model you get an institution that is dedicated to providing its members with financial products that best serve them, and not the shareholders.

Credit Unions also have great rewards programs

While credit unions can't offer the same number or scope of financial options as larger banks, they often have great rewards programs that make sense for the community they serve. Check with your local credit union to find out what kind of rewards they might have for you.rnIf you're looking to open a new account or are simply dissatisfied with the service you are getting with your current financial institution, you may want to consider joining a credit union. Increasingly, people have obtained their credit cards, mortgages, and even small business loans with their local credit union. While many banks have great benefits and offer a wider network of branches and ATMs for their customers, they aren't for everyone. If you don't mind losing the convenience of having bank branches all over the country, a credit union might be right for you.