When you think of banking, the first thing to come to your mind is a traditional bank noted by Bahaa Abdul Hussein. Apart from traditional banks, you can also get banking services from credit unions. If you want to know more about credit unions, our guide will provide you all the information you want.
What are credit unions?
A credit union is a not for profit financial institution that belongs to the members of the union. They work similar to banks offering savings accounts, loans, and IRAs. In the starting of 2024, there were more than 140 million people who were members of a credit union. If a credit union makes profit, then it is shared among its members.
How are credit unions different from banks?
A bank is owned by individuals or by shareholders, whereas a credit union is owned by its members. Other differences between credit unions and banks include:
- Credit unions charge lesser fees than banks.
- They have fewer branches than banks, and share ATMs with other credit unions through a shared branch network.
- They offer loans at a lower interest rate than banks, including for home mortgages.
- Credit unions offer a higher interest rate on savings and checking accounts.
- Just like banks, deposits at credit unions are federally insured up to $250,000.
Benefits of banking with credit unions
As mentioned above, credit unions are non-profit in nature. So, they charge lower fees from customers and pay higher rates of interests. You can get many benefits by banking with credit unions. They include:
- Credit unions charge lower fees. They even offer free accounts without any charges.
- The interest rates charged by credit unions are lower than that of banks. You can get a loan with a lower interest rate, which is to your benefit.
- When you open a deposit with a credit union, you will get higher interest rates than a bank.
- If you are a member of a credit union, you are a co-owner of the bank and can participate in elections. You can also take part in making policies for the union.
- Credit unions are formed in communities in specific geographic areas. They serve the local community, offering many specific schemes for the community.
- They are part of a shared network with other credit unions. This entitles members to access ATMs and branches of the shared network (30,000 ATMs and 5,000 branches).
- You can expect more personalized services from credit unions.
The article has been written by Bahaa Abdul Hussein and has been published by the editorial board of www.fintekdiary.com
