Article Advise

submitted: Aug 14th 2008 | by: WilliamBlake | Total views: 3 | Word Count: 504 | |

Credit unions certainly have fewer locations and are less common than banks. That doesn't mean that they offer services of a lower quality, though. Consider the advantages offered by credit unions to understand what differences there are between them and traditional banks.

1. Who owns them? Banks are owned by a group of investors. They decide the policy and administer the work of the bank. Banks are organizations that look to make a profit so that the investors can recoup a return on their investment. Credit unions are owned by the members. The board is made up of volunteer members who want to serve their fellow members. As shareholders in the credit union, each member gets a vote and has a voice in policy making decisions that affect their money.

2. Do they keep your money safe? Any money being stored in a bank is guaranteed to be there by the Federal Deposit Insurance Corporation (FDIC) and this guarantee is displayed at each and every bank. Credit Unions follow a similar process and are 100% secure, but the Credit Union National Association (CUNA) is the organization backing them up.

3. Who can join? Anyone who can meet the requirements of the banking institution can open an account there. Banks have a greater reserve of cash at their disposal so they offer incentives to get customers in the door. They call these "loss leaders". If half of the people that come in open an account, then the bank can afford to take a loss on the items that they are giving away for free.

Credit unions, however, cannot be joined without first meeting some sort of prerequisite for becoming a customer. These can include factors like religion, workplace, geography, and civic affiliation. By keeping the total number of members low, credit unions can provide better, more personalized customer service.

4. Are they friendly? Banks do what they can to attract new customers, but their real loyalty belongs to the investors in charge of the bank's care. This is why their customer service often waxes at the time you open new account but wanes quickly.

Customers of credit unions are also making the business decisions for the company, so the customer service is traditionally better. To keep future interest rates on credit cards and loans low, money that exceeds the running costs of a credit union is used to maintain interest rates on money market accounts, savings accounts, and CD's as high as possible.

Banks don't like credit unions because they offer something that they don't: consistent customer service and better interest rates. On the other hand, banks have incentives that credit unions can't match because they don't have as much money to use on them. The choice is up to each customer to decide what is most important to them in an institution.

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