Benefit of Credit Unions
Unlike banks, credit unions are financial institutions owned by those who hold accounts. This means that any member can run for an administrative position and vote in elections. Additionally, credit unions are nonprofit and reinvest any excess capital in its members. According to The Wall Street Journal website, as of 2008, 90 million people hold an account at a credit union.
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Benefits
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Because of their non-profit nature, credit unions do not try to create new ways to charge fees for customers--typically leading to lower interest rates. Any profits are divided between their account holders, according to Liz Weston of MSN Money Central. Additionally, you can probably find a credit union to offer you an account, as they accept people that belong to a certain demographic, such as an employer, or those who live in a certain geographic area. Credit unions minimum deposits are usually lower than those at banks--often as low as $1.
Features
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Like a normal bank account, nearly all credit union accounts are insured up to $100,000 by the National Credit Union Administration (NCUA), according to All Business. Additionally, The Helping Families Save Their Homes Act of 2009 increased insurance on credit union accounts to $250,000 through at least 2013. Also, credit unions generally allow family members of current customers--kids, kin and spouses--to sign up for the credit union and usually with a very low minimum balance.
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Considerations
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Credit unions tend to weather tough economics times better than traditional banks, according to The Wall Street Journal website. Since credit unions did not authorize many sub-prime mortgages, they were generally unaffected by the 2007 recession. Additionally, they do not need to spend money on advertising, large bonuses to head management and other costly initiatives.
Downside
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Credit unions usually do not have many branches because they tend to serve small regions and usually have no ATMs, according to the Motley Fool website. Three percent of credit union accounts lack NCUA insurance, putting you at risk in case the union goes under. Also, credit unions may not offer all of the services you would expect at a regular bank.
Tips
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Use the America's Credit Unions website to find a local credit union that will accept you as a member. Make sure your credit union has NCUA insurance by either asking or looking for the NCUA label. Check out the bank's services, such as credit and debit cards, before signing up. In addition, look for Coop members if you want to avoid ATM fees.
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