Joining a federal credit union has plenty of advantages over traditional banks and financial institutions. Members can take advantage of all the services and options a federal credit union can offer, including high yield investments and finding loans. With many of the same features and financial options as most banks carry, there are plenty of reasons to join a federal credit union.
Here are 5 reasons why you may want to think about joining a federal credit union.
- Non-Profit – Credit unions are non-profit financial organizations that offer a secure place for members to save and invest money. Since they are not for profit, there are no shareholders or board of executive members to please. Instead, credit unions focus on providing financial education to it’s members, along with the best possible high yield investment options. Given that banking institutions are driven by profits (not its customers), credit unions offer a great alternative.
- Low Fees and Minimum Balances – According to the National Credit Union Administration, the average cost to join a federal credit union averages between $5 – $10. This fee is normally put into a “share” account that the member does not lose. Federal credit unions also have low to almost non-existent fees on several of their products. For example, most wave any ATM fees making them a great financial tool to help save those hard earned dollars and provide easy access to your money.
- Higher Deposit Rates – Credit unions offer much higher deposit rates for their customers compared to banks. These non-profit organizations are not concerned about profits, which allows them to pass along the savings to their members. According to DATATRAC, Inc., the national average return for a credit union on a 12 month CD ($10,000 deposit) was 1.43% in December, 2009. The national average for banks for the same investment was 1.12%. Investors would get a 27% increase in their earnings by switching from a bank to a credit union for this high yield investment.
- Lower Loan Rates – A credit union will also provide lower rates on auto, home equity, and credit card loans. For example, DATATRAC, Inc. shows the national average interest rate on a credit card at 11.65% in December, 2009. The average for banks was 12.71% for the same period. Furthermore, the average rate on a new automobile at a credit union was 5.22% compared to 6.37% from a bank for a 60 month term. Some credit unions even offer better loan rates for employees who make automated payments directly from thier paycheck.
- Easier to Get a Loan – Have poor credit? Looking to purchase your first home? Chances are, you will have an easier time securing a loan through a credit union as opposed to a bank. One of the main goals of these organizations is to help provide financial counseling to its members, especially those with poor credit. This makes it easier to apply for first time loans for members with past credit problems.
National Credit Union Administration
The National Credit Union Administration (NCUA) is responsible for supervising all U.S. federal credit unions. This independent federal agency operates the National Credit Union Share Insurance Fund (NCUSIF) among other responsibilities. The NCUSIF guarantees all investments up to $250,000 for each of its members. While a credit union is less likely to fail compared to a bank, it is still important to pick one that is backed by the NCUA to protect your investments.
Final Thoughts
Federal credit unions provide a secure and stable financial environment for members to invest their savings. They also have competitive loan rates by focusing on providing quality service to their customers instead of corporate profits. As banks and other financial institutions continue to struggle in a poor economy, credit unions provide a great alternative.
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