Wary of Banks? Consider Credit Unions
The bad press banks have been getting in the last few years has encouraged people in the United States to move their money to credit unions. The Financial Times reports that US credit unions have been surging in popularity lately as big banks increased fees for consumers. Global attention during the recession drew attention to corporate profits, something that credit unions are thankfully free of.
Maybe you should consider the move, too. Here are some of the reasons why:
You have a voice. Credit unions are owned by members. You have real influence in the way they’re run. Every member has one vote.
The customer comes first. There are no external shareholders extracting profits from credit unions. This means all of its money goes to providing cheaper loans and more attractive rates for savers. In high-street banks, the pressure to generate dividends for shareholders leads to many questionable practices that aren’t necessarily in favor of the customer’s best interests.
No overpaid executives. Managers at credit unions are usually paid a standard salary, without the lavish bonuses and other rewards of their counterparts in high-street banks. The board comprises elected members, sitting voluntarily and for no salary.
Stable and secure. Credit unions lend out most of their savings to other members. The remainder is invested into short-term savings, often in banks considered by the board to have ethical practices and principles. This tends to make credit unions very stable, compared to big banks that routinely speculate on complex financial instruments that depositors do not really understand and have very little visibility on.
Ethical. Saving in credit unions can be regarded as an ethical investment because money you put in allows the credit union to make loans to people in the local community who might otherwise be prey to loan sharks or high cost lenders.
Higher interest, lower fees. In general, credit unions offer higher savings rates, meaning that your money grows faster, and lower rates on loans, meaning that you will owe less over the lifetime of the loan. Credit unions also tend to charge less in fees and offer better interest rates on credit cards.
So what, exactly, are credit unions? Credit unions are community organizations run by and for their members. There are several key features:
Members only. Union members must have a common bond. That means they may live in the same area, work for the same employer or have the same profession. They can also be members of the same church or trade union.
Non-profit.They are run on a ‘not for profit’ basis. Instead of paying a profit to shareholders, they use money they make to reward their members and improve their services.
Regulated and insured. They are regulated by National Credit Union Administration, which acts in the same manner as the Federal Deposit Insurance Corporation (FDIC) do for banks. Your money is protected by the National Credit Union Share Insurance Fund (NCUSIF), which is a government backed insurance fund for credit union deposits. It guarantees funds up to a limit of $250,000. should the credit union fail.
By and far, credit unions offer borrowers the best alternative for loans so waste no time on scouting around for one that you’re qualified to be a member of. Keep these things in mind for extra motivation:
Ho hidden charges. There are no hidden charges with credit union loans and no penalties if you repay the loan early.
Free life insurance. Credit unions also include free life insurance at no extra cost. If you die before repaying the loan, the balance would be paid off for you.
No collateral for short-term loans. Most credit unions can lend for up to five years on an unsecured loan and up to ten years on a secured loan. Some can lend for up to 25 years on a secured basis.