July 27, 2014

What the F**k are Credit Unions?

30 minutes

When it comes to storing your cash, you have three choices, under the mattress, a credit union, or a bank. Don’t do the first one. That leaves us with credit union vs. bank, which one is better for your money?

If you’ve contemplated ditching your bank and joining a credit union, we’ll lay out the differences between the two so you can make the best decision for your money.

Banks Suck

Banks have almost always had bad press, and much of it they have earned. We all remember 2008 when they nearly collapsed the world economy or more recently, Wells Fargo underhanded little scheme that involved opening accounts without customer’s knowledge or permission.

After all the recent bad press, it’s not surprising that people want an alternative to traditional banks. Credit unions provide that alternative.

What is a Credit Union?

A credit union is a non-profit money making cooperative where members can borrow from pooled deposits at lower interest rates. They exist to serve their members rather than maximize corporate profits.

Credit unions range from small, volunteer-run organizations to quite large with thousands of members run by a professional board. Credit unions are started by corporations or organizations to serve their employees or members.

Arkansas AM&N College Federal Credit Union is an example of a small credit union. It was started by and for the employees of the university in 1952 and serves fewer than 1,000 members made up of university employees, alumni, and their family members.

The largest credit union in the U.S. is Navy Federal Credit Union with more than seven million members.

It started in 1933 with just seven members!

Members are made up of all Department of Defense and Coast Guard active duty, veterans, civilian and contractor employees and family members of all those groups.

When you join a credit union, you become part owner just as you own part of a company when you buy its stock. Members vote to select the board of directors and for decisions that will affect the credit union.

Each member has an equal vote without regard to how little or how much money he or she has in their account.

Currently, about one-third of Americans belong to a credit union.

But Do They Have Lollipops?

Credit unions offer the same core products that banks offer; checking and savings accounts, home, auto, and personal loans, debit cards, online bill paying, paper checks, CDs, certified and cashier’s checks, money orders, and safety deposit boxes.

How Credit Unions Differ From Banks

Investors own banks and banks have a responsibility to make money for them.. That might be through legitimate means like loaning money and earning interest or illegitimate means like opening fraudulent accounts.

It can also mean earning money by charging customers outrageous fees. That isn’t illegal, but something doesn’t have to be unlawful to be ethically questionable.

Credit unions exist to serve their customers/owners. Looking after the bottom line for a credit union means operating in the best interests of their customers/owners.

That means that credit unions often offer better interest rates both on checking and savings accounts and on loans than do traditional banks.

Credit unions charge fewer

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By ListenMoneyMatters.com | Andrew Fiebert and Matt Giovanisci

4.4

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