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A credit union and a bank are not the same thing. If you’re not a Member of a credit union already, you might consider joining one. Although credit unions offer many of the same services as banks, like checking and savings accounts, loan products, investment options, and credit cards, credit unions have some key differences when compared to banks.
The more obvious benefits are often discussed among credit union Members: great rates and lower fees, personalized service, the emphasis on people over profits. There’s a reason behind these advantages. Most credit unions operate under a list of principles. There are multiple versions of these that vary across the country, but they’re pretty simple and consistent. These principles serve as a kind of guidepost by which credit unions are able to operate and ultimately better serve their Members. Here’s a list of three great credit union benefits and the guiding principles that make them possible.
Great Rates and Lower Fees Many credit unions are able to offer higher interest rates on savings and investments. Plus credit union loans and credit union credit cards often have lower rates to help Members as much as possible. Credit unions also tend to have fewer and lower fees than banks. How do they do this?
One common principle is that credit unions depend on their own Members’ economic participation. That is, the Members contribute to and democratically control the capital of their cooperative. This directly benefits Members because credit unions are typically able to offer better rates, fees, and services than their for-profit counterparts.
Personalized Services Credit unions are cooperatives, which means they are owned and operated by their very own Members, rather than by stockholders like a bank. This type of ownership means that credit union Members are in charge of making decisions about policies and procedures, ensuring that the credit union is Member-focused instead of being focused on making as much profit as possible. In the case of a profit-focused bank, they may have to cut into profits in order to offer benefits to their customers, which is contrary to their objective to earn as much profit as possible. This is not an issue with Member-owned, not-for-profit credit unions.
Community Support and Involvement Credit unions are not only focused on the needs of their Members, they’re guided by a strong desire to give back to the communities they serve, including populations that are oftentimes underserved. Many credit unions operate under a social purpose: They strive to do everything they can to assist not only their Members, but all of the individuals in the communities they serve.
People with a troubled financial past might be unlikely to receive funding on a loan request at a bank, especially if the bank receives thousands of loan requests each month. Credit unions are able to spend more time analyzing loan requests, which gives a more human element to their decision-making process.
Ultimately, credit unions are an awesome alternative to traditional banks because they offer similar products and services with some real tangible benefits that can make a difference to Members and their communities. If you’re considering a credit union, make sure you ask about all of their programs and benefits.
Visit Cornerstone Credit Union League to read the seven cooperative principles that many credit unions in Texas follow, including University Federal Credit Union.
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