Credit unions have been around since the 1840s when a group of weavers in England banded together to form the Rochdale Society of Equitable Pioneers. Credit unions continue to be pioneers in the financial world, providing a level of service to their members that traditional financial institutions cannot match. But why should you join a credit union? Here’s what’s in it for you.
Money, money, money
Credit unions typically offer higher rates of interest on savings accounts and lower rates for loans. This can put more money in your pocket every year, and save thousands over the life of the loan. Some federally charted credit unions are legally enjoined from charging interest rates over 18 percent on their loans; this can make a significant difference for consumers with troubled credit histories. Additionally, credit unions are not-for-profit organizations.
What does this mean for you?
For one, it means the credit union doesn’t have a vested interest in charging you outrageous fees for every transaction. Because all profits are redistributed among members (yes, this means you as well), credit unions are less focused on wringing every last cent out of their members and more interested in providing services for them. Most credit union credit cards don’t require an annual fee; free checking accounts and lower penalties for overdrafts are typical features of most credit unions.
The National Credit Union Administration insures credit union deposits up to $250,000; this is similar to the protection the FDIC affords to depositors in traditional banking institutions. Credit unions have weathered recent financial difficulties remarkably well, due in part to the sense of community they foster among their members. When credit unions do fold, they are typically assimilated into another credit union, allowing consumers to continue banking as usual through the new organization.
Statistically, credit unions have outperformed traditional banks; this is especially true in recent years during the housing and financial crisis. In 2008, only 1.37% of all loans held by federally insured credit unions were delinquent. Only 1.19% of home loans were delinquent. These figures represented significant increases, but not the crippling blows that other types of banking institutions experienced over the same period.
Unlike money deposited with large, impersonal banking institutions, the money invested with credit unions stays within the community and is put to work helping individuals and businesses in your own home town. The money you deposit, for instance, may go toward a new building project or a franchise opportunity that will offer services for the entire area. Because credit unions are largely locally-owned and operated, the entire community reaps the benefits of your investment.
The sense of community extends to new members as well. Many credit unions are open to high school or college alumni, members of local churches or religious groups, through work-related affiliations, or residents within a specific geographical area. No matter what your occupation or work status, there is likely a credit union in your area that will welcome you as a member.
Credit unions were established in the United States in 1934 by the Federal Credit Union Act. Franklin D. Roosevelt stated that credit unions were intended to “promote thrift and thwart usury,” and they have done just that for over 70 years. With more advantageous rates and better services than traditional banks, credit unions put their emphasis directly on customer service. Credit unions are not-for-profit; this places them squarely in the sights of traditional banks that see them as threats to the all-important bottom line.
If you enjoy paying exorbitant fees for substandard customer service, then credit unions are not for you. But if you are interested in saving money while investing in your local community, credit unions offer great benefits and security for your hard-earned cash.