Credit unions serve their customers as opposed to their stockholders, which is just one of the many benefits of credit union membership. Another great perk is the opportunity to save money on your banking transactions.
Opening a credit union account is not a difficult process, but you must meet membership guidelines. To learn how to join a credit union near you, visit its website for details. Some credit unions cater to specific groups of people and some credit unions allow anyone to join.
Here are five ways credit unions can save you money, and search for the best credit union in your area.
Credit Unions Are Not for Profit
State, local and federal credit unions are not-for-profit financial institutions, which means that instead of focusing on making money, they strive to offer better products with lower loan rates — and higher interest rates on savings accounts — to customers. Generally, fees are lower at credit unions than traditional banks. They typically charge enough only to cover operating costs — and paying lower banking fees is in the interest of all customers.
Learn: Advantages and Disadvantages of Credit Unions
Credit Unions Offer Lower Loan Interest Rates
At credit unions, you’ll likely get lower interest rates on loans, which can save you a lot of money. The average four-year, new-car loan rate in March 2017 was 2.66 percent for credit unions and 4.58 percent for banks, according to the National Credit Union Administration.
The total interest on that loan from a credit union for $15,000 would be $828.75 and the interest on the bank loan would be $1,444.46. If you financed through a bank you’d pay double what you would if you got a credit union loan.
See: 10 Best Credit Unions for Car Loans
Credit Unions Have Lower Customer Service Fees
If you compare credit union versus bank fees, you’ll see a big difference. Additionally, credit unions generally have lower minimum balance requirements than many banks. Both of these things can save you money on monthly service charges.
Credit unions also require you to sign up for overdraft protection, which can save you money on service charges. Instead of using overdraft protection, you might have the option to connect a savings account to your checking and pay a small fee to transfer money to cover overages. Fees vary depending on the credit union, so do your research and find the one with the best rate.
Earn Higher Interest With a Credit Union Account
Comparing bank vs. credit union interest rates on savings products shows that credit unions generally offer higher interest rates on CDs and savings accounts. For example, the average interest rate for a credit union’s five-year, $10,000 CD is 1.56% APY, and the average for banks is 1.27% APY.
The total interest you’d earn on the credit union CD would be $804.72 and the total you’d earn on the bank CD would be $651.34. The additional $153.38 in interest you’d earn at a credit union is substantial. You might be able to find even higher rates by shopping around at local credit unions.
Related: Learn About the Different Types of Credit Unions
Credit Unions Work With Borrowers
Credit unions are more willing to work with customers who need to borrow money fast, which can help you avoid borrowing from a predatory lender. Some credit unions offer a more affordable alternative to payday loans called PALs.
The max fee on these loans is $20 for up to $1,000, whereas a payday loan generally carries a fee of $15 per $100. This means a payday loan would cost you $150 for a $1,000 loan and a credit union would cost you only $20. A credit union’s loan terms might also be friendlier — you could get a longer time to repay the money because credit unions try to help borrowers avoid becoming trapped in a borrowing cycle.
Keep Reading: How Do Credit Unions Make Money?