6 Benefits of Credit Unions
Recent events in the global economy have led banks to tighten their lending standards and to raise their interest rates. This has left many individuals out f the loop, in the ability to access vital banking services. The solution for this scenario has come in the form of credit unions. Unlike banks, credit unions are owned and operated by its members, whose eligibility is limited to certain communities, region, workplace, church, etc.
Here are some of the benefits potential members can expect to accrue by joining a credit union:
Better Interest Rates
Credit unions can accept deposits and offer loans to members. The rate charged for each transaction is often better than those offered by traditional financial institutions like banks. According to an analysis done by the National Association of Federal Credit Unions, the average interest rate charged by banks for a 4 year loan is 6.92%, while credit unions charge 5.43%. The interest rate for a 5-year certificate of deposit in a credit union will yield a return of 3.94%, whereas as a bank CD will yield 3.54%. Many credit unions also maintain a cap on the amount of interest they can charge for a loan.
Deposits are insured
The deposits made into a credit union account are insured by the National Credit Union Administration (NCUA), for deposits of up to $250,000. Just like banks credit unions can also fold their operations, though this will often mean that they will merge with another credit union. But, regardless of what happens members are guaranteed of their deposits through the NCUA insurance. According to the NCUA standards, if a federally insured credit union fails, members are typically entitled to their payments within three days. The NCUA allows members to check on their coverage.
They are non-profit organizations
Credit unions are granted a non-profit status by the government, which makes them exempt from federal tax. The profits earned from their activities are then shared among members, according to their ownership in the union, based on the deposits they have made into their account.
They offer the same services as banks
In a bid to remain competitive and to be useful to members, many credit unions offer the extra services you can expect in a normal bank account. Credit unions offer services like credit and checking accounts, consumer and personal loans, mortgages, credit and debit cards, home equity loans, IRA’s and many other products and services.
Security of accounts
Many credit unions pride themselves in ensuring the security of their member’s accounts. They also offer members with information and training on how safeguard themselves from identity theft and how to manage their credit cards.
Cheaper to maintain
As compared to a normal bank account, credit union accounts are a lot cheaper to maintain. Fees are generally absent and there are no minimum balance requirements.
Tips and comments
The level of technology offered and access to ATMs is often low as compared to banks. Therefore, make sure to check the level of services offered by a prospective credit union and their network of ATMs.
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