What’s A Credit Union And Why Should I Switch From My Bank?

By Patrick Keefe, Vice President of Communications for the Credit Union National Association

 Should I transfer my personal financial business from a bank to a credit union?

Many consumers are asking themselves that, right now, particularly as they react to announced plans by some large financial institutions to impose new fees on their account access (via debit cards), and as efforts such as “Bank Transfer Day” urge consumers across the nation to switch from a bank to a credit union.

The answer to the question, of course, is a personal one. Naturally, we believe credit unions are the best option for consumer financial services. And if people are upset with big banks, we think they should look at a credit union, and they’ll like what they see. But, each consumer has to make the choice of what works best for them, their families and their futures. So, we know that not everybody will ultimately decide to make the change – but we encourage all to give it a very close look.

So, what exactly is a credit union?

  • It’s a not-for-profit financial cooperative, organized solely to meet the needs of its members.
  • Each credit union is governed by its members. The membership elects unpaid, volunteer officers and directors who establish the policies under which the credit union operates. Officials must be from within the credit union’s membership.
  • Voting is one person, one vote. This means that every member has an equal voice regardless of the amount of savings or loans they have with the credit union.
  • To join a credit union, a person must be within its field of membership. Typical fields of membership include employee groups, associations, religious or fraternal affiliations and residential areas.

Sounds okay, but what most people really want to know is how they can I save or earn. In this day and age, that’s a very typical, yet important, question to ask.

On just about any given day, on average, credit unions offer higher return on most savings, lower rates on most loans, and lower (or no) fees than other financial institutions charge (see the daily rate comparison). In fact, the Credit Union National Association estimates that, over the last year (12 months ending June ’11), the average credit union member saved $69 (and $132 per household) just by doing business at a credit union.

Another example: Financing a $25,000 new car for 60 months at a credit union would save a credit union member an average of $174 each year in interest expense compared to what that member would pay at a bank. That’s about $1,000 in savings over five years.

Furthermore, loyal members – those who the use a credit union extensively – often receive total financial benefits that are much greater than the averages cited here.

So, back to the question: Should I switch?

Make your best decision based on your needs and that of your family. But – if you like saving money, and conducting your financial business at a place that focuses on your needs – join a credit union. You can find one here: www.aSmarterChoice.org.

Patrick Keefe is the Vice President of Communications for the Credit Union National Association.

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