We all want to spend our money wisely, and most shop for the best deals on everything from soap to sports cars. In an increasingly expensive world, every penny counts and for your banking needs, this is also true.
Do you conduct your financial transactions at a bank or credit union? They both have similar products and services, but their structure and outlook are different, affecting the rates they have on offer.
Did you know that credit unions have better rates than regular banks? Here’s why.
To get a better understanding of why credit unions are more beneficial with their products and services, you can look at its origins.
The first credit union was opened up in Levis, Quebec, in 1900 by a man named Alphonse Desjardins. His goal was to set up a cooperative to empower the working class so they could manage their own money without interference from the state. Fast forward to today, and there are over 86,000 credit unions across 118 countries worldwide.
Credit unions have had many firsts in Canada, including:
- Lending money to women in their names
- Full-service ABMs
- Fully functional online banking
- Open mortgages
- Debit card services
- Home equity line of credit
- Daily interest rates
Credit unions have a long history of having better rates along with charging low to no fees, and this is why so many people find it a much better place to conduct their financial transitions and other banking requirements. If you want to open up your first savings or checking account, a credit union is the best place to go.
The Business Model
The main reason that credit unions can offer better rates is because of the way the institution is structured.
They Are Not For Profit
This means that they are a non-business entity that operates to cover its operating expenses and the rest put into their membership and local communities.
They Are Membership Owned
While banks are private businesses that work to make a profit for their owners and shareholders, credit unions are owned by the people who become members, and the membership votes in a volunteer board of directors.
They Are Community Focused
Local credit unions strive to make an impact through social and community development and see it as a responsibility to support and collaborate with local organizations.
By becoming a member of a credit union, you are part of something that impacts your area directly, including your pocketbook.
Credit unions are designed to give back profits through reduced rates for various products and services. Regular banks answer to stakeholders, and they are mainly focused on profits, which dictate their lending decisions and interest rates. They strive to be competitive but first return earnings to investors and shareholders while trying to find the right balance.
A credit union doesn’t have these obligations. Their profits are redistributed, and each member benefits from this as they focus on returning value to their membership as a financial cooperative.
Rates at a credit union will be higher for savings and investment products like:
- Savings accounts
- Checking accounts
- Mutual funds
In turn, they have lower fees for lending products like:
- Credit lines
- Credit cards
A credit union will also have fewer transaction fees, checking account minimums and other hidden fees. While some charge overdraft fees, they will cover your shortfall and charge you less than a traditional bank.
Some local credit unions are part of larger chains, which serve as a network for enhanced banking options. Multiple branches and a network of ATMs allow for fee-free withdrawals and more travel convenience.
Beyond the benefits of favourable rates that credit unions can offer, they are flexible with their lending criteria. This means more people can qualify for loans, credit cards and mortgages more easily and reap the rewards from the lower rates these products come with.
They are willing to work with their members to meet their financial needs and make it easier to obtain credit and loans, even if their financial situation is less than ideal. They take into account:
- Non-traditional employment
- Alternative forms of collateral
- Unique financial situations
- The character of a member
- Their specific affiliation with a common bond like military service, industry, company or community
Online and mobile banking services are also a big part of credit unions, and they use cutting-edge technology to provide faster and more secure service in the digital realm.
For those well-versed in the services of a financial institution, becoming a member of a credit union will be a smart move. You will get more personalized service, a sense of belonging to a cooperative of like-minded individuals, supporting a movement that gives back to its members and community and, of course, better rates for all their financial products and services.