When it comes to saving money in a bank account, it would seem that they're all about the same. Most give you a lousy interest rate and a number of fees in exchange for keeping your money with them. Who says you have to use a “bank” for your banking needs? Maybe a credit union would be better for you?? Here are the two primary differences between a credit union and a bank, to help you determine which one is better for your situation:
1. Credit unions are owned by the members
When you become an account holder through a credit union, you instantly become part owner of the union. Don't expect to receive an executive office or anything, but the idea that you are a partial owner helps the employees of the credit union treat you like a person when you come in to do your transactions rather than just another profit center, which is often the mentality of banking executives.
2. Banks are “for profit” businesses while credit unions are not-for-profit
The non-profit status of credit unions helps explain how they can offer account holders higher interest rates and fewer fees as compared to banks. When a credit union earns more than they need to run their business, the profits are distributed as dividends to the members (the account holders!) as compared to the banks who seem to create new fees and banking policies regularly in order to keep increasing their profits and giving executives bonuses and higher salaries.
Bank owners have actually spent a lot of money and time trying to get legislation passed that would not allow credit unions – or to make it difficult for people to qualify for credit union membership. They're convinced that credit unions have an unfair advantage as a non-profit, cooperative business structure – which also puts credit unions in the “exempt” category for most federal and state taxes. Many critics and members of credit unions argue that if the banks spent that money on improving their interest rates and lightening their banking fees, they'd have an easier time competing with credit unions. The first credit union began in 1934 – when President Roosevelt signed the Federal Credit Union Act into law and the banks have been fighting against them ever since.
Many people wrongly believe they don't qualify for credit union membership. The fact is, almost anyone can belong to a credit union these days, as you can qualify based on where you live, work, or associations to which you belong. Some qualifying associations are so easy to join, people join them just for the ability to become a credit union member!
The Credit Union National Association estimates that credit union members save around $8 billion per year through higher interest rates and lower fees, compared to their banking friends. There are currently about 90 million members belonging to various credit unions around the country.
Credit Union Advantages
Many people apply for credit union loans for their cars for example, because they often can get a much lower interest rate than they could at the dealer. Once they've obtained their loan, they find out how much lower the checking account fees are, or how much lower the interest rates are for credit cards issued through credit union as compared to bank issued credit cards. In addition to lower credit card interest rates, credit union cards rarely charge an annual fee or increase interest rates for a single payment made late. When you overdraft a bank account, you can expect a $39 overdraft fee on average, while credit unions average between $20 and $25 for an overdraft.
When using a debit card through your credit union, typically the transactions are free at a wide network of ATMs. Sometimes, credit union ATM usage fees will be reimbursed to the account holder up to a certain dollar amount per month, too.
If you're interested in a credit union, check with your employer to see if you qualify. If you are unemployed or your employer doesn't have information, you can also search for credit unions through JoinACU.org.