The Pros and Cons of Credit Unions

An alternative to a commercial bank is a credit union and there are both advantages and disadvantages of using either of these options. A credit union differs from a commercial bank as it is a not-for-profit financial organization that pays out dividends to its members. On the other hand, banks are institutions that make a profit and they only pay dividends to stockholders. If you are considering joining a credit union, it is important to consider your own financial position and the pros and cons of credit unions before making your decision.

Here are 5 pros of credit unions:

1. You Are a Member

You are not just a customer at a credit union, you are a member. This makes you a part-owner of the credit union and you will receive dividends and voting rights.

2. They Have Lower Fees

Another way that credit unions pass on savings to their members is by giving them lower fees than commercial banks. This means that in most circumstances, it costs less to have an account with a credit union than a traditional back.

3. They Offer Better Rates

If you take out a loan with a credit union, you will get lower rates than you would with a traditional bank. You can also earn more on your deposits as they pass on surplus funds to members by giving them higher interest rates on their accounts.

4. It is About the Community

Members of a common workplace or community run credit unions and the members run this credit community. Credit unions are designed to benefit all members of the community.

5. The Customer Service is Better

Typically, you can expect better customer service from a credit union than from a commercial bank. One reason for this is that they are smaller organizations than most commercial banks. This means that the staff get to know the customers better and are more likely to focus on their needs. Another reason is that credit unions have a greater focus on benefiting everyone in the community and recognize that customer service is an important element of this.

And now here are five cons of credit unions:

1. You Have to Pay Membership

The first disadvantage of becoming a member of a credit union is that you must pay a membership fee to join. However, the membership fee is usually very low with most costing between $5 and $25. Most credit unions also have minimum deposit requirements to open an account with them and these vary from one credit union to the next.

2. They Are Not All Insured

It is important to note that not all credit unions are insured. There are some that are insured by NCUA, but others are not. This is something you might want to check before taking a risk with your money. Federal credit unions are insured by the US government and banks are insured by the FDIC.

3. There Are Limited Branches and ATMs

Many credit unions are location-based. Therefore, they only operate in a small area. This means that they have limited branches where you can go to discuss your needs and make face-to-face financial transactions. Similarly, they only have limited ATMs and you may not have access to your money from ATMs belonging to other banks or organizations.

4. They Offer Fewer Services

Large commercial banks have the money and staffing to offer a wide range of services to their customers. Credit unions have come a long way in improving the services they offer, but they still fall short of the commercial banks. For example, a credit union may not have the capacity to offer you a large commercial loan. If this is a service you require, it is likely you will need to turn to a commercial bank that offers this service.

5. Poor Technology

As banks are organizations that make a profit, they have the money to invest in technology. Credit unions are not-for-profit organizations and do not have profits to put into technological developments. This means that if you are with a credit union, it is unlikely that you will have features such as mobile apps. On the other hand, most commercial banks have websites, online banking apps, and apps that allow you to use a smartphone to pay for goods while out and about.


Add Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Kevin Mayer
20 Things You Didn’t Know About Kevin Mayer
10 Reasons to Add Peer to Peer Lending To Your Portfolio
Maryellis Bunn
20 Things You Didn’t Know About Maryellis Bunn
David Einhorn
20 Things You Didn’t Know About David Einhorn
Apple Card
10 Drawbacks About Owning The Apple Card
Do You Really Need to Save That Much for an Emergency Fund?
10 Recession Proof Dividend Stocks You can Lean On
York Water Stock
20 Reasons You Might Consider York Water Stock
Blockchain
Five Companies Leading the Way in Blockchain Technology
airplane technologies
20 Technologies That Will Rule the World in 2020
Chatbots
The Growing Use of Chatbots in Customer Service
Data Breach
Four Reputable Companies That Faced Massive Data Breaches
The 20 Best Hotels in Sedona, Arizona
The 20 Best Things to Do in San Antonio for First Timers
Oceanside Municipal Pier in San Diego
The 20 Best Seafood Restaurants in San Diego
10 Reasons Puerto Vallarta Beach Club is the Ultimate Romantic Getaway
Best Cadillac SRX Models
The 10 Best Cadillac SRX Models of All-Time
2016 Mercedes-Benz GLC Class
The 10 Best Mercedes GLC Models of All-Time
Best Cadillac Escalade Models
The 10 Best Cadillac Escalade Models of All-Time
Best Ford Ranger Models
The 10 Best Ford Ranger Models of All-Time
The 20 Best Gym Watches for 2020
Diesel Men's Master Chief Quartz Model DZ1206
The 20 Best Diesel Watches of All-Time
The 20 Best Skagen Watches of All-Time
Oris Martini Racing Limited Edition
The 20 Best Oris Watches of All Time