A credit union is an alternative to a commercial bank, and both of these alternatives have advantages and disadvantages. A credit union is distinct from a commercial bank in that it is a non-profit financial institution that provides dividends to its members. Banks, on the other hand, are profit-making enterprises that solely pay dividends to investors. Before deciding whether or not to join a credit union, think about your individual financial situation as well as the benefits and drawbacks of credit unions.
1. You are a member
You are a member of a credit union, not just a consumer. You will get income and voting rights as a result of being a part-owner of the credit union.
2. Their fees are lower.
Credit unions also save money for their members by charging them cheaper costs than commercial banks. This implies that, in most cases, a credit union account is less expensive than a standard bank account.
3. They Provide Lower Rates.
When you borrow money from a credit union, you will pay cheaper interest rates than if you borrowed money from a regular bank. You can also make extra money on your deposits since they provide surplus cash to members in the form of greater interest rates on their accounts.
4. It’s All About Community.
Credit unions are governed by members of a shared workplace or community, and the members run this credit community. Credit unions exist to help everyone in the community.
5. Customer Service is Better.
A credit union will often provide greater customer service than a commercial bank. This is due to the fact that they are smaller businesses than most commercial banks. As a result, employees get to know their clients better and are more inclined to focus on their demands. Another reason is that credit unions place a larger emphasis on serving the community as a whole, and customer service is a key part of that.
Here are five disadvantages of credit unions:
1. You must pay a membership fee.
The first drawback of joining a credit union is that you will have to pay a membership fee. The membership price, on the other hand, is generally relatively modest, with most memberships costing between $5 and $25. To start an account with a credit union, most of them have minimum deposit requirements, which vary from one credit union to the next.
2. They are not all covered by insurance.
It’s worth noting that not all credit unions are covered by insurance. Some of them are insured by NCUA, while others are not. This is something you should look into before putting your money at risk. The US government insures federal credit unions, while the FDIC insures banks.
3. The number of branches and ATMs is limited.
Many credit unions are based on location. As a result, they only function in a limited region. This implies they only have a few locations where you may discuss your needs and conduct financial transactions in person. Similarly, they have a restricted number of ATMs, and you may not be able to withdraw money from ATMs owned by other banks or organizations.
4. They Provide Limited Services.
Large commercial banks have the resources and personnel to provide a diverse set of services to their clients. Credit unions have gone a long way in terms of enhancing their services, but they still lag behind commercial banks. A credit union, for example, may not be able to provide you with a significant business loan. If you desire this service, you will most likely need to contact a commercial bank that provides it.
5. Inadequate Technology.
Because banks are profit-making businesses, they can afford to invest in technology. Credit unions are non-profit institutions with no revenue to invest in technological advancements. This implies that if you bank with a credit union, you’re not likely to get services like mobile applications. Most commercial banks, on the other hand, offer websites, online banking applications, and apps that let you pay for things with your phone while you’re out and about.