A credit union is a cooperative financial institution that is owned and controlled by its members and operated for the purpose of promoting thrift, providing credit at reasonable rates, and providing other financial services to its members. Many credit unions exist to further community development or sustainable international development on a local level. Worldwide, credit union systems vary significantly in terms of total system assets and average institution asset size, ranging from volunteer operations with a handful of members to institutions with several billion dollars in assets and hundreds of thousands of members. Yet credit unions are typically smaller than banks; for example, the average U.S. credit union has $93 million in assets, while the average U.S. bank has $1.53 billion, as of 2007.
The World Council of Credit Unions (WOCCU) defines credit unions as “not-for-profit cooperative institutions”. In practice however, legal arrangements vary by jurisdiction. For example in Canada credit unions are regulated as for-profit institutions, and view their mandate as earning a reasonable profit to enhance services to members and ensure stable growth. This difference in viewpoints reflects credit unions’ unusual organizational structure, which attempts to solve the principal-agent problem by ensuring that the owners and the users of the institution are the same people. In any case, credit unions generally cannot accept donations and must be able to prosper in a competitive market economy.
As consumers, we are doing all we can to make ends meet and start saving more cash. Interestingly, the one place people fail to notice they are losing cash is the exact same place they store their cash. Banks have been raising their fees and lowering their interest rates, leaving customers unsure of what to do. There is no chain binding you to your banking institution and may want to consider your other options.
Exploring Your Options
A credit union is one such option. Banks and credit unions do differ and you should take a look at what your local credit union have to offer you. There are over 90 million people who belong to credit unions across the country and nearly anyone can belong to a credit union because of their employer and other associations where the consumer belongs.
Exploring the Differences
Credit unions are owned by its members. When you open an account at a credit union, you essentially are part owner in the business. You are more likely to get better customer service that at your traditional bank. Credit unions are not designed to make a profit, therefore their fees are smaller and occur less frequently than at a bank. The profits that are made will then be divided up amongst account holding members. Banks keep adding fees in order to boost profits. Unlike bank, credit union ATM cards can be used at a large network of ATM’s for no fee. Some will even reimburse you for fees incurred from other ATM’s used.
Many consumers have joined credit unions only to get a good deal on a loan but then come to discover the other benefits, such as lower fees, better interest rates, and good mortgage rates. Many will find a credit union from information given out by their employer. Otherwise you can find a credit union for you here.
Deposits at a credit union are insured for at least $250,000 on each account. That coverage is provided by the Federal Deposit Insurance Corporation and backed by the federal government. If you haven’t taken a serious look at your bank policies lately, now is a great time to do just that. You may be surprised to see exactly how much your bank is costing you each month. You can always comparison shop with other local banks and see what kind of deal you can get, or even negotiate with your current bank to get a better deal but if you find that banks are no longer meeting your financial needs, check out your local credit union for more options.
One of the ways to establish credit is to take out small loans and repay them according to the payment schedule. Credit unions are more likely to offer small loans to help you build credit. Another way to build credit is to get a secured credit card where you have a low limit (perhaps $500) and a savings account with that same amount of money in it. You use it like a regular credit card, but have the funds as a back-up to show you’ll pay. Simply belonging to a credit union will not help establish credit, but since credit unions are more likely to work with you to help you establish credit, I encourage you to consider joining one. Hope this helps. Good luck!