Why Join a Credit Union? Here Are 10 Reasons
Why join a credit union? Local, member-owned financial institutions have deep roots in many American communities and provide a flexible, more accessible alternative to large commercial banks. We take a look at what credit unions are, how they work, and the key reasons many consumers still prefer them to larger for-profit banks.
What Is a Credit Union?
Credit unions are cooperative financial organizations owned jointly by their members. Everyone with an account has a share in the ownership of the credit union. As a member, you are both an owner and an investor in the credit union’s success.
Credit unions typically have roots deep in local communities and were often started when employees at a company, government office, or school pooled their financial resources in order to access affordable banking services and credit. Since then, many credit unions have banded together or extended their reach, but the feel of community remains core to their identity.
How Do Banks and Credit Unions Differ?
Credit unions are not-for-profit organizations, meaning that they are run on behalf of their members, not shareholders, and any excess funds are reinvested in the credit union. Services are provided more or less at costs, rather than seeking to maximize returns from every transaction.
Banks, on the other hand, are “for-profit” organizations that sell services to their customers to benefit their owners, or shareholders. Shareholders also control the board that decides how the bank is run. While most started as locally owned companies, almost all banks are now part of big regional or national corporations with few connections to any individual communities.
Credit unions are also regulated differently than banks. They need to keep more of their reserves on hand, rather than in “at risk” investments and they also need to maintain a stake in the loans they grant, rather than being able to repackage and resell loans, as banks do. This means that more credit unions’ assets remain in the hands of their members.
Why Are Credit Unions Important?
Credit unions provide crucial access to safe, well-regulated financial services in many communities, especially for people just starting out on their financial journey or those in service professions including teachers and local government staffers, as well as healthcare and utility workers.
True to their roots, credit unions also provide services in places commercial banks do not.
Today, almost 5,000 credit unions across the U.S. together manage $2.17 trillion in member assets. According to the National Credit Union Administration (NCUA), the sector now extends loans on family residential properties worth almost $660 billion and $486 billion worth of auto loans on both new and used cars, accounting for almost 1 in 3 auto loans extended in the U.S.
Why Should You Join a Credit Union?
Let’s take a look at what member ownership, not-for-profit status, and local connections mean in practice. Here are 10 good reasons why you should join a credit union.
1. Low Fees
With no incentive to maximize profits at every stage of the banking process, credit unions offer many services at cost or are able to eliminate many fees commonly charged by banks. Expect to pay low or no monthly and annual service charges as well as fewer checking, cash advance, and overdraft fees. Loan application and processing fees are also less common.
2. Lower Minimum Balances
Similarly, with less need to support investments on the open markets, credit unions often require members to keep less money in their deposit accounts. That means more checking, savings, and money market accounts with no or very low minimum balance requirements.
3. Higher Interest Yields
Unlike banks, credit unions do not need to maximize the difference in rates between the interest they charge on commercial loans and the money they borrow from you to make profits for themselves. That means money in your savings, money market, and share certificate accounts will earn a higher annual percentage yield (APY).
4. Lower Interest Rates
It also means credit unions do not need to charge as much on the money they lend to members in the form of annual percentage rates (APRs) on personal, auto, and home loans, credit cards, lines of credit, home equity financing, and even business loans. Members win on both ends!
5. More Flexible Terms
Without the need to maximize profits, credit unions are also able to be more flexible on the terms they offer when making loans. Depending on your circumstances, credit unions may be willing to lend money for longer or allow you to borrow against more of the value of your home or car.
6. Fully Insured Deposits
All this flexibility comes with the same built-in safety that deposits at commercial banks enjoy because the federally-backed NCUA insures individual deposits in every credit union up to $250,000.
7. Great Local Service
Credit unions continue to serve the communities that created them. While they might have fewer locations than big banks, they are more likely to maintain branches in places where commercial banks no longer offer in-person service. Their smaller size also means you are more likely to be able to talk directly to a senior manager or the loan officer administering your loan.
8. Long-Term Relationships
Credit unions know they are more likely to succeed when their members thrive. The staff at your local credit union has an interest in getting to know you better and understanding your financial goals. At a credit union, you’re more likely to be recognized when you walk in the door, rather than having to start from scratch at every visit.
9. Financial Resources and Tools
That natural interest in members’ well-being means credit unions often also provide a host of financial resources and tools for their members from helpful blog posts and online mortgage calculators to webinars on home purchasing or investments. Many credit unions are also advocates for financial literacy, often supporting classes and programs in their communities.
10. Voting Rights
All this talk about member ownership means something. Being a member and owner means you get to vote on who sits on the volunteer board that oversees the operations of the credit union. You can even run for election to the board or various committees yourself!
Argent Credit Union: We’re Here for You, Richmond
Argent Credit Union is a full-service not-for-profit financial cooperative owned and operated by its members. At Argent Credit Union, we return earnings to our members in the form of lower loan rates, higher savings rates, and fewer to no fees.
Created in 1956 to serve DuPont employees in Chesterfield, VA, the Argent Credit Union now serves more than 26,500 members throughout the Richmond metro area. Membership is open to anyone who lives, works, attends school, worships, or volunteers in Chesterfield, Henrico, or Hanover counties or the City of Richmond.
If you are looking for a Richmond credit union, please come talk with us. We’d love to get to know how we can serve your financial needs.
