If you’ve ever been in search of a bank or financial institution to help protect your hard-earned money, you’ve probably heard the term “credit union.” But what exactly is a credit union? How is it different from a bank, and why should you join one?
1. Credit unions are not for profit, so any earnings are returned back to YOU
While banks are for-profit organizations, credit unions are not. The term “union” is extremely fitting because all credit unions are owned, not by a conglomerate, but by the union’s members. A board of directors, who are elected by union members, oversees the credit union. Any profits are returned to members in the form of reduced fees, higher savings rates and lower interest rates for loans.
2. Credit unions still offer the same benefits and services as banks
Whether it’s depositing money, writing checks or applying for loans, credit unions offer many, if not all, of the same services as a local bank. Many belong to a nationwide network of credit unions, which gives members accessed to shared services like ATMs. And like banks, credit union deposits are insured by the federal government (most for up to $250,000) so you’ll never have to worry about the safety of your money.
3. You’ll often find a better deal on interest and loan rates
If you’re looking for a lower loan rate or a higher savings interest rate, you should check out credit unions. According to MyCreditUnion.gov and SNL Financial, an independent company that regularly tracks rates from credit unions and banks, credit unions often edge out traditional banks with more desirable rates.
In December 2016, the all-credit union average rate on 5-year CDs was 1.52 compared to 1.23 for the national average rate of banks. When looking into a credit union, visit their webpages or contact them directly for the most up-to-date rates.
4. Members of credit unions share a common bond
At some banks, you may feel like just a number amongst the hundreds or thousands of other customers. Credit unions, however, are formed on the basis of common bonds; many employers sponsor their own credit unions for employees, some credit unions pertain to specific geographic locations (like MidWest America Federal Credit Union or Florida West Coast Credit Union), and others are intertwined with a specific labor, trade or service (like the Navy Federal Credit Union that offers membership to members of the military).
If you’re unsure of whether you have the right affiliations for a credit union, don’t worry – many credit unions offer membership to anyone who agrees to abide by the union’s membership rules. Here’s a list of inclusive credit unions compiled by U.S. News & World Report.
In Tucson, your go-to credit union is Pima Federal Credit Union. With over 55,000 members and more than $470 million in assets, Pima Federal is built on the notion that great financial institutions are about relationships, not transactions. For more information on how Pima can help you reach your financial goals, visit PimaFederal.org or call (520) 887-5010.