Credit Unions Offer Intimate Alternative To Big Banks
For some, a credit union beats out a bank as the right solution for one's financial needs. NY1's Shazia Khan filed the following report.
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Credit unions have been around in the United States since the early 1900s, and for some the smaller financial institutions are a better fit than bigger banks.
The major difference comes down to ownership. A bank is owned by shareholders, whereas as a credit union is a not-for-profit cooperative owned and controlled by its customers that often offers better service.
Credit unions are also member-based and while their eligibility varies, they are not as exclusive as one might think.
"Generally in the past, membership was very restricted. You had to work with a certain company or maybe belong to a certain church. Now membership is a little bit broader," says Kelli Grant of SmartMoney.com. "A lot of employers do have these, but there are also credit unions that focus on specific income levels within a community. they focus on just a broad areas, if you live in a certain county anyone can become a member. If you have a friend or a family member who is a member than you might be able to become a member too."
Credit unions, for the most part, offer low- or no-minimum checking and savings accounts and other services including CDs, IRAs and loan products such as mortgages and credit cards. While it is always good to compare fees and interest rates, they tend to be more agreeable at credit unions.
"Since they are not-for-profit organizations, they are not taxed, while banks are taxed. So the membership gets an extra benefit by that decreased layer of taxation, and deposit rates are usually more favorable than a bank and the lending rates are usually less expensive than a bank," says certified financial planner John Visconti.
Many credit unions now offer online banking but convenience can still be an issue.
"Credit unions have one or two physical locations for that credit union. You are going to have a hard time finding ATMs," says Grant. "Most of the credit unions do have partners nationwide. You're going to have to do some digging and find out where the partner ATMs are, so you know where to go so you're not charged the fee."
Deposits at the vast majority of credit unions are insured by the National Credit Union Administration, an independent federal agency.
"Coverage is identical to the [Federal Deposit Insurance Corporation] coverage in terms of amounts. It's up to $100,000 for most of your basic checking and saving accounts and different levels depending on the product," says Grant.
For more information, visit www.ncua.gov.