How To Get Into The Union

The Benefits of Credit Unions

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If you're shopping for a place to keep your money, you have several options. National banks offer the convenience of a large number of ATMs and branches. Local banks give you personalized service. Online banks skip the brick-and-mortar branch system to offer lower rates. Where do credit unions fit in this?

Credit unions are nonprofit financial services organizations. They offer the same services as a bank, but there's one major difference. Unlike banks that must make money and please their shareholders, credit unions share their earnings with their members. That's not the only benefit of banking at a credit union.

Banking Fees

The not-for-profit structure of credit unions gives them freedom to offer services without fees usually charged by banks. Members often receive ATM surcharge rebates when they have to use an ATM in a different network. They also can save at their own pace without monthly minimums or required transfers into savings accounts.

In most cases, you don't need to maintain a minimum balance to enjoy fee-free checking with convenient services. For example, Hickam Federal Credit Union in Hawaii has a completely free checking account with online bill pay and optional overdraft protection. Banks offer these same services but may restrict them to certain accounts with additional requirements.

Community Involvement

Many credit unions start for a specific group of people and may expand their membership criteria over time. For example, Suncoast Federal Credit Union in Florida started as an organization for educators. Chartway Federal Credit Union in Virginia opened its doors for people at the Norfolk Air Base.

The emphasis is on community. Credit unions take active roles in the communities they serve, sponsoring events and offering financial literacy courses to people of all ages. They donate money to foundations that support everything from summer camps to scholarship programs and green initiatives.

Customer Service

Credit unions earn top marks for their customer service, especially when compared to big national banks. Each member in a credit union gets the same number of votes: one. This promotes equality among members so that no one receives special services based on the amount of money they deposit.

Deposit Protection

The National Credit Union Administration insures deposits in credit unions the same way the FDIC protects bank deposits. This applies to deposits up to $250,000 in a federally chartered credit union. You put your money in a credit union without worrying about losing it should something happen to the organization.

A few credit unions choose a private insurance program to protect their deposits. These credit unions are usually sponsored by the state where they do business. You can identify these credit unions by asking or looking for the NCUA deposit insurance disclosure printed on materials or on the website.

Loan Qualifications

Like banks, credit unions have requirements for loans and want to make sure you can pay back what you borrow. Credit unions have more flexibility to look at more than the information on the loan application. When you apply for a loan at a credit union, you have a better chance of speaking directly to a loan officer or manager to explain your financial situation. This increases your odds of getting approval even if you have less than perfect credit.

Rates

Credit unions also enjoy tax breaks and exemptions that they pass on to their members through favorable rates. On average, credit unions give their members higher interest rates on savings accounts and lower interest rates on loans. These savings extend to other financial services like CDs.

Favorable rates is one reason Massachusetts' Hanscom Federal Credit Union won the top spot on Kiplinger's annual list of top credit unions. Customers can choose a savings account with a 3% rate or a money market account that earns 1%. The credit union also gives customers rebates when they use foreign ATMs.