What Is a Credit Union?

Do you need a new place to store your savings? Are you frustrated by the surcharges, unhelpful customer service, and hidden fees associated with commercial banks? You may want to look into keeping your money at a local credit union. These financial institutions serve many of the same function as most banks, but they differ in a variety of fundamental ways. Each institution provides different benefits to different individuals, businesses, and borrowers. Whether you want to take out a loan for your small business, or you simply need a checking account, this might be the choice for you.

So what exactly is a credit union? It is a cooperative financial institution in which its members use their funds to offer services and funds to other members. They are not for profit entities, and there are structurally a cooperative to ensure fairness. Many people find them to be beneficial because unlike a bank, which is a business designed to make profits for its shareholders, these financial institutions are owned by its members. Profit is not a driving factor for the institution. Each member often has the ability to vote on the organizations' activities, and some members are even paid dividends at the end of each fiscal year.

These intuitions also offer much more personal, family-like customer service. The customers are the owners, so the decisions made will benefit everyone involved, and in most cases, this means that dealing with customer service in a credit union is much different than traditional banks. Plus, since the main incentive isn't necessarily to make a profit, and there is much less pressure for the organization to find ways of making money, you may find your experience to be much more genuine.

There are a few disadvantages to this model. For instance, there are fewer ATMs than many banks. National commercial banks may have ATMs scatter across the country, and there are probably several in your area, which means that you are less likely to have to pay a surcharge to get money from an ATM. In many cases, a credit union will allow you to use a third party ATM, and if you are charged a surcharge to use the ATM, you will get a refund on your statement.

Membership is also restricted in these financial institutions. They tend to focus on people who are involved in the community and people of modest means. Applying to join may be slightly more difficult than getting an account at a commercial bank. Just like banks, your credit union will offer you a variety of financial services and products. From savings accounts to checking accounts, loans, and mortgages, you might find that this non-profit organization is the right choice for you.

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