Learn How Credit Unions Play A Key Role With Saving Consumers Money

The Credit Union National Association or CUNA has stated that credit unions are controlled, owned, and operated by its members, who combine their resources and assets to offer loans and other financial products and services at a favorable price. All credit unions are governed by common bonds that also lay out the terms and qualifications of membership. Credit unions are fast becoming as alternatives for conventional banks and loans and savings firms.

Who can become members of credit unions?

CUNA maintains that credit unions are available for everyone. However, law mandates that all credit unions must have well-defined terms of membership. The common bonds of credit unions define the membership qualifications. A common bond can be the area of residence of the members, their work places, and their membership to an association like trade unions, churches, schools, etc. For example, individuals can join a credit union if it is sponsored by their employer.

Advantages of a credit union membership

Credit unions are owned by its members. Hence, they are more sensitive to the needs of its members and work hard to offer more favorable services as compared to normal banks. They may provide free business checking services and/or loans with low interest rates. Such services can result in considerable cost savings as opposed to banks. In addition to more personalized services, credit unions also provide helpful seminars and business courses for small business owners. It may also be noted that credit unions have stringent lending terms which in turn result in fewer charge-offs as compared to banks and other financial institutions.

Banks versus credit unions

Credit unions are not for profit co-operative bodies that are usually run by volunteer board members. This allows credit unions to offer varied flexible and low-priced financial services and products like competitive service fees and fair interest rates. Members may even avail of dividends in case of profits. Due to their non-profit co-operative status, credit unions are also exempt from several federal and state taxes. As opposed to this banks are owned by stockholders. Also, banks are organizations that work towards maximization of profits.

Drawbacks of using credit unions

One of the major shortcomings of a credit union is the fact that its customer base is restricted to only its members. Therefore, they may not have sufficient funds to cater to your big-purchase needs. It is therefore advisable to weigh the benefits of credit unions against its cons, before closing all your accounts with traditional banks.
A number of credit unions do not give mortgages. Additionally, the lending ratio of credit unions, as of September 2010, has been restricted to 12.25 percent of its overall assets. Hence, large loans can usually be availed from traditional financial institutions.

The scope of services provided by credit unions can also very limited, particularly as regards to business accounts. Merchant account services or business checking accounts are offered by select few credit unions. Also, only about 1/3rd of the total credit unions in US provide business loans.

Lack of contacts, expertise, and products may also prevent credit unions from efficiently handling certain accounts, particularly if the business operates internationally. Many credit unions now offer consumer credit cards, debit cards and saving opportunities. Learn more about finding the best credit cards and online credit card offers by visiting https://best-credit-cards.org

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