Although both banks and credit unions offer similar financial services and products, credit unions offer extra benefits to their members that banks cannot. These benefits can help members increase their savings more easily.
Member Benefits
The biggest advantage of banking with a credit union is the membership status one has with that credit union. These institutions use memberships as a way to share earnings with their members. These returns are given in the form of low loan interest rates, high deposit interest rates, low or no fees, and overall enhanced convenience.
Low Loan Interest Rates and Fees
Since credit unions can offer low loan interest rates and low or no fees, you can save money overall by owing less. Federal credit unions can’t charge an annual percentage rate (APR) higher than 18% for most loans, but the average APR for a new-car loan on a five-year term at a credit union is even lower at 3.45%, according to the National Credit Union Administration. Other financial institutions offer APRs that can reach up to 36%. On top of an overall lower APR, the associated fees can also be lower than at banks or even zero.
High Savings Interest Rates
Credit unions also offer higher interest rates on savings accounts than other financial institutions. This can result in better returns each year for credit union members. Most credit unions also have high-yield savings accounts, which are federally insured, so they can earn at rates that are much higher than the national average, typically 20 to 25 times higher.
Added Convenience
Although big banks have more capability of offering a large amount of services and conveniences, credit unions work with the ultimate goal of benefiting their members. They use this motivation to provide convenient service to their members in many ways. Most credit unions participate in extensive ATM networks which allow their members to access surcharge-free ATMs nationwide. Many credit unions also are interconnected through “shared branching,” which means that a member will be able to make banking transactions for their credit union at many different physical locations.
Ownership Advantages
Along with all these advantages of membership, all members are also partial owners of the credit union. This means that each member can participate in the affairs of the credit union: voting to determine the board of directors and other decisions regarding the union. This way members have a firm handle on their savings as well as the institution assisting in their finances. With all of these services and benefits combined, building and managing savings with a credit union is easy, convenient, and of lower cost to each member.