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Credit unions are community-based financial institutions that offer many of the same financial products and services as banks, but with a not-for-profit mission. Customers of credit unions are called “members”. When you belong to a credit union, you are part-owner of the organization and receive benefits in the form of reduced costs and dividends on interest-bearing accounts.
Members of credit unions are often able to get lower APRs on loans, higher returns on savings accounts and paid checking accounts, and other benefits that banks may not be able to. to offer.
In addition to great interest rates, credit unions offer a few other special and surprising ways to support their members. Especially in times of financial need or economic crisis, credit unions may be able to provide quick help and assistance to help their members stay afloat financially.
If you are considering joining a credit union, you might want to know some of the perks and perks of joining.
Skip payments and waive fees
At the onset of the 2020 pandemic and economic crisis, the financial system changed, seemingly overnight, to offer generous loan forgiveness programs and other options to help people falling behind on their payments. invoices. Even in normal times, credit unions may be more likely than other financial institutions to offer additional forgiveness and help to members facing financial difficulties.
“Credit unions put their members first and change their products and services for those in need,” says Carrie Hunt, executive vice president of government affairs and general counsel for the National Association of Federally-Insured Credit Unions ( NAFCU). ), a professional association that advocates for credit unions. “Credit unions were at the forefront of Skip a Pay programs and were working with members who might not have been able to make a payment that month. “
Credit unions also tend to waive fees on accounts if customers are having trouble maintaining their balances or making payments on time. “Credit unions tend to have lower fees and lower fees than banks, but they quickly give up the fees they collect,” says Hunt.
Favorable access to credit for small borrowers
For people who are struggling to qualify for credit, or for small business owners who may not need a larger loan than banks typically give, credit unions may be able to to offer better options for personal loans and small business loans.
Credit unions offer personal loans, often referred to as signature loans, which are unsecured loans that do not require collateral. When you apply for a loan from a credit union, they look at your overall financial situation and work history to assess your creditworthiness, not just your credit score. The credit union’s personal loan approval process can be more lenient and lenient than that of a typical bank.
Credit unions also offer short-term emergency loans of up to $ 5,000 and alternative payday loans (ALPs) of $ 1,000 to $ 2,000. Depending on your credit history and finances, and depending on which credit union you are applying to, you may be eligible for a lower interest loan from a credit union than you might get from other financial institutions or opportunistic payday lenders.
“Credit unions are not-for-profit and exist to provide credit, in good times and bad,” says Hunt. “There has been a lot of talk over the past few years about payday lenders and high interest rates on consumer debt. Credit unions are there to help people avoid this situation.
Another example of how credit unions give loans to the little guy, under the Paycheck Protection Program (P3) during the pandemic, credit unions issued many more small loans than banks. The average amount of PPP loans issued by credit unions was $ 50,000, compared to over $ 100,000 for the average amount of loans issued by banks.
Credit unions place a strong emphasis on small businesses and small borrowers. If you need a loan for your personal or business needs and you haven’t been able to qualify or have not received an attractive offer from other lenders, you may get a larger audience. nice to a credit union.
A leader in diversity and inclusion
Credit unions are non-profit organizations whose mission is to provide credit to the communities they serve. As part of this mission, credit unions tend to have a higher representation of diverse communities and more women in leadership positions.
The FDIC and the National Credit Union Administration (NCUA) maintain lists of Minority Depository Institutions (MDIs), which are federally insured depository institutions where “(1) 51% or more of the voting shares are held by persons belonging to minorities; or (2) a majority of the board of directors is a minority and the community that the establishment serves is a majority minority.
Monitoring MDIs helps regulators to ensure underserved communities have access to credit and financial opportunities. Credit unions are particularly important in supporting diverse communities: 528 credit unions are classified as MDI, compared to 149 banks. And 51% of credit unions have female CEOs, compared to just 3% of commercial banks.
“We live in a diverse country with different needs, and a one-size-fits-all approach to banking doesn’t necessarily benefit everyone,” says Hunt. “Credit unions are created to serve their members first and provide more specialized thinking about people’s financial needs. “
Support online banking
Considering that credit unions are non-profit organizations, you might be thinking that that probably means they don’t have the same cutting edge technology as banks do, right? Wrong. Credit unions often have a full suite of online banking tools, mobile apps and more. Two credit unions were on Forbes Advisor’s list of the best checking accounts for digital banking.
“During the pandemic, credit unions have embraced an increased offering of virtual services,” says Hunt. “We don’t want to force people to walk into the credit union to sign something. We adapt to help do business the way people want.
Encourage financial education
Credit unions may also have special programs to help their members improve their financial well-being. For example, CommunityWide Federal Credit Union in Indiana offers a partnership for its members to get free financial advice on debt management, student loans, and other personal finance issues. At best, a credit union is not just a place to keep your money; it is a community service organization that helps people improve their financial security.
“It’s in the DNA and culture of the credit union not only to have a defined product line, but [to] focus on serving members, ”says Hunt.
This personalized service appears to have a strong positive effect on customer satisfaction of credit unions. According to Consumer Reports, 96% of members of credit unions say they are “very satisfied” with their banking services, compared to 80% of customers of the three largest national banks.
Credit unions are a constant presence in the financial lives of more than 122 million Americans, both in cities and small towns across the country. Because of their nonprofit status and their mission to provide credit to those in need, credit unions can sometimes offer better interest rates on loans and savings accounts. Some credit unions may offer the best CD rates or be listed among the best current account providers.
And beyond interest rates, members of credit unions can benefit from a variety of special services and offers that many banks may not be able or inclined to provide. While many banks are also good corporate citizens who work to help their customers on a day-to-day basis, some people may prefer the member-centric approach of a full-service credit union. Consider the pros and cons when deciding if a credit union membership is right for you.