The Advantages & Disadvantages of Credit Unions
A credit union is a financial institution that provides many of the same services as a bank, but is operated slightly differently. If you are looking for a place to handle your financial transactions, a credit union should definitely be something to consider as an alternative to a traditional bank.
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Function
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Credit unions are organizations that are actually owned by the depositors in the union. This organization is set up to provide loans to members as well as to use members' money to make the loans. Account holders in this type of financial organization are then paid an interest rate on the money that they have in their accounts. Credit unions provide many of the same services as banks, except that they are not run for a profit like traditional banks are. This provide them with non-profit, tax exempt status with the government.
Interest Rates
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One of the biggest benefits of this type of financial institution is in the competitive rates that it can provide. When you deposit money in your account, the interest that you will earn on your money will be higher than what you could get from a bank savings account. On the other end, if you borrow money from the credit union, they do not have to charge you as much in interest. The savings that they get from not having to pay taxes gives them the ability to offer lower interest rates on loans.
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Service
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Credit unions are known for providing a different level of service to their customers. These organizations know that every account holder is actually an owner in the credit union. With traditional banks, you may not always get service that is in your best interest. The bank will always make decisions based on what is best for its interests. With credit unions, they always want to make you happy because you are an equal owner in the company.
Branches
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One of the drawbacks of credit unions is that they typically do not have as many branches as banks do. Many credit unions are locally operated and may only have a few branches in a specific area. They may also have fewer ATMs that you can use without having to pay a fee. If you live in the vicinity of a credit union, this may not be an issue. If you are not near a branch, it could be very inconvenient.
Considerations
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One of the differences between this type of financial institution and a bank is that credit unions are not insured by the Federal Deposit Insurance Corporation. The National Credit Union Administration is the body that insures the majority of credit unions. This can give your account protection on balances as high as $100,000. When you open an account with a credit union, you need to find out if the credit union is insured by the National Credit Union Administration so that your money will be protected.
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