Debt Reduction Advice | Debt Reduction Advice

One of the fastest growing types of financial institutions in the U.S. is the credit union. As banks have made headlines highlighting the mismanagement of their loan portfolios and the way their fees negatively impact client returns, many disenchanted bank customers are turning to credit unions for their day to day banking needs. Credit unions used to be somewhat difficult to get into as membership was based on specific professions, union memberships, or geographic locations. Today, joining a credit union is as easy as opening a new bank account anywhere. Here are some of the reasons people are making the switch.

Low Fees – Many credit union customers like the fact that credit unions are not-for-profit businesses. Banks are responsible to shareholders and must show steady revenue and profit growth to satisfy shareholders. Credit unions have no such responsibility. As a result, most credit union accounts are available to customers without fees and for transactions like overdraft charges that typically are associated with fees, credit unions are generally reasonable compared to banks. Credit cards, for instance, typically carry much lower fees when they are issued by a credit union.

Better Interest Rates – Again, because credit unions don’t have to worry about generating a profit for shareholders, they’re usually able to beat banks when it comes to both savings rates and interest rates associated with loans. Because members own the credit unions, the profits that are generated through banking activities are passed back to the members of the credit union in the form of more attractive interest rates. Many consumers go to credit unions for smaller loans, such as signature loans or auto loans, in order to take advantage of the better interest rates.

Better Service – Many bank customers have experienced negative customer service issues over the past few years. Bank branches are the face of the institution, but most banks are headquartered in some big city thousands of miles from most of their customers. Banks for the past two years have been much more worried about their survival than they have about providing exceptional customer service. Most credit unions, on the other hand, have just a few offices in region and are able to focus their efforts on maximizing service for their base of members.

Member Owned – Although I’ve touched on this in each of the above areas, this is a big deal to members of credit unions. As members of a credit unions, customers have the opportunity to plug themselves in to the decision making process. Most credit unions have boards that are composed of credit union customers and their smaller size allows for customers to feel that their voices are being heard. With credit unions the members benefit from any profits that are generated and since the generation of profit is not the overall goal, the focus is usually on offering competitive products, rates, and services to members

Safety – the safety of bank deposits hasn’t been a big issue in the past because of FDIC insurance, but recent headlines show that the FDIC fund has been largely tapped out with the massive bank failures of the past few years. Credit Unions are insured by the NCUA, or National Credit Union Administration, which offers the same federal insurance limits on deposits as the FDIC program.