Advantages and Disadvantages of Credit Unions

Oftentimes, people defer to banks as the default for managing their funds. However, there is a whole other option available for those who are looking to keep their finances secure. If you’re looking for an alternative to opening a bank account, try joining a credit union! Credit unions are not-for-profit organizations that serve its members and pay them dividends, making them different from a bank. If you want to know more about the Difference Between a Credit Union and Bank, you can refer to our info post for clarification.

While the option to join a credit union is definitely out there, consider the pros and cons before becoming a member. When it comes down to it, the choice between banks and credit unions is really a personal one, so keep all the facts in mind before making a decision. If you want to know more about the advantages and disadvantages of a credit union than keep on reading to find out more!

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Advantages of Credit Unions

Here are some reasons why you might want to sign up for a credit union:

• You’re a member, not just a customer. You’re not just someone opening an account, but you’re treated as an equal. One of the benefits of a credit union is that you’re not just a customer, you’re a part-owner. You’ll get top-notch customer service, voting rights and dividends.
• You’ll pay lower fees. Credit unions also pass on savings to members in the form of lower fees. That means you’ll be saving two ways — on lower fees and discounted loan rates.
• Better customer service is standard. Credit unions typically provide superb customer service. Because they tend to be smaller organizations than banks, credit union employees can get to know members and focus on their needs.
• Community comes first with credit unions. Credit unions are owned and run by members of a common community or workplace — like employees from a certain company. Credit union services are designed to benefit the local community and those who live there.
• You’ll get better rates. A credit union will get you lower rates on loans and typically enable you to earn more on deposits than traditional banks. Because credit unions are nonprofits, they pass on surplus funds to customers in the form of higher interest rates on deposit accounts.

Disadvantages of Credit Unions

On the other hand, there are definite drawbacks to opening a credit union. Carefully consider these before becoming a member:

• You must become a member. To take advantage of all a credit union offers, you must become a member, which will typically cost between $5 and $25, not including any additional minimum opening deposit requirements. If you’re not part of any group, there are plenty that anyone can join.
• They offer limited branch locations and ATMs. Many credit unions operate only in one location. Although the smaller, community-based focus is what attracts many credit union customers, the lack of multiple bank branches could be an inconvenience. Note, however, that many credit unions belong to shared ATM networks, which eliminates the issue of not finding enough credit union ATMs.
• Not all credit unions are insured. Similar to how banks are insured by the FDIC, federal credit unions are also insured by the U.S. government through the National Credit Union Administration. Although most credit unions are insured by the NCUA, some are not.
• Fewer services and options are available. Credit unions have come a long way in matching big bank services but not all can. If you need a large commercial mortgage loan, for example, your credit union might not be able to handle one.
• Credit unions aren’t as tech-savvy as big banks. Commercial banks have much larger assets than credit unions, which might not have enough money to fund new technology. For example, you might find banking apps, mobile deposits and the like only at bigger banks and credit unions.

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Author’s Verdict

Now that you have all the information on credit unions, you can make an informed decision on which institution you’d like to be a part of. Just remember, not all credit unions will offer the same benefits. Research the ones around you to see which ones offer the best bank deals and bank rates.