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All of us are looking for ways to get help planning and achieving our savings goals. With so many financial institutions out there, it can be difficult to determine who has your best interest at heart and will do the most to help you achieve your savings goals.
A credit union is a not-for-profit financial cooperative. This means everyone who is a member of a credit union is also a part-owner of that credit union. As a not-for-profit organization, any would-be-profits for shareholders are passed along to the members in the form of better rates and services.
Like banks, credit unions vary significantly in size and offerings. Some credit unions are local and exist to serve a particular community, while others accept members nationwide. Some may have numerous branches, while others are fully-digital.
Unlike banks, however, credit unions have membership qualifications you must meet before joining. Depending on the credit union, these qualifications can be very specific or something almost anyone could meet. For example, some credit unions only accept members from particular employers. On the other end, you can become eligible for Alliant membership by joining Foster Care to Success, and Alliant will even pay your $5 membership fee on your behalf.
Banks and credit unions offer similar products and services, and both exist to fulfill the same need in your life. If you need a savings account, checking account, credit card, etc., you can find those at either a bank or a credit union.
The fundamental difference between a bank and a credit union is that credit unions are not-for-profit financial cooperatives, whereas banks are for-profit financial institutions. A bank seeks to make profit and pass those profits along to shareholders. A credit union seeks to serve its members and passes what would be profits back into the business. This isn’t to say banks are always bad and credit unions are always good, but the end goal of each type of institution is very different.
You may come across other minor differences between banks and credit unions, where each has a different product or service that accomplishes the same thing. For example, banks offer certificate of deposits (CDs), while credit unions offer share certificates. Both provide the same benefits, but are technically not the same thing. Another example is deposit insurance. When opening a bank account, you should look for FDIC insurance, while the credit union equivalent is NCUA insurance.
Rates are always changing, but credit unions often offer consistently competitive rates across the board. Having your money in a high-yield savings account that earns a higher interest rate than most, helps you grow your money faster and reach your goals sooner. When it comes to loans, having lower loan rates will keep your monthly payments down and free up more of your budget.
Credit unions aren’t looking to make a profit by nickel-and-diming their members with countless fees, so you can often avoid many fees you’ll find at other financial institutions. Still, it’s worth double-checking to make sure the credit union you’re joining doesn’t have them, as every credit union is different. Some of the most common fees you’ll encounter are overdraft fees, monthly service/maintenance fees and ATM fees.
National Credit Union Association (NCUA) insurance ensures money you deposit up to $250,000 at a credit union is backed by the full faith and credit of the United States government. It is the equivalent of FDIC insurance at a bank and something you should always double-check a credit union has before becoming a member. No member of a federally insured credit union has ever lost a single penny of insured savings.
You may already qualify to be a member of a credit union, even if you don’t know it! Maybe you qualify for membership through your employer, an immediate family member’s employer or through another organization you’re a part of. Whether you already qualify for membership at a credit union or not, there are credit unions that offer easy ways to become eligible for membership, like Alliant.
In addition to offering great rates and low fees, credit unions are constantly working to serve their members and communities in other ways.
This blog is one example of how a credit union can provide free financial education, but it’s far from the only method. Credit unions often host free webinars, in-person workshops and more to provide financial education to both members and the public.
Credit unions often support causes and other organizations in order to benefit their communities beyond financial products and services. For example, the Alliant Foundation is Alliant’s charitable arm that seeks to bridge the digital divide by providing resources to those living in under-resourced communities without access to technology many people take for granted. While other credit unions may not be focused on the digital divide specifically, the same effort to creating a positive impact can be seen across many credit unions.
When you’re looking for a financial institution that will have your back and help you plan and achieve your savings goals, look no further than a credit union. Through their not-for-profit, member-centered structure, low fees, competitive rates and dedication to their community, you can count on credit unions to help you achieve your savings goals.
Learn more about credit unions:
Ben Heinze is a marketing content specialist with a passion for financial education. Instilled with a strong sense of frugality from a young age, he views money as a means to building the life you want, rather than an end in itself. From reading Money Mentor, he hopes you discover new ways money can be used to build your ideal life—whatever that may look like.
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