Whether you’re searching for your first financial institution or you want to ditch your current big bank for something with a more local feel, credit unions can be a great option for you. There are many credit union benefits, but there’s one problem: Many myths surround these institutions.
Many people have no clue how they function. Some may even think it’s like joining a secret club! But we’re here to break down the truth about credit unions and debunk three common myths about them.
What is a Credit Union?
Are they the same thing as banks, or are they different? Well, they act like banks, but think like community-driven organizations.
According to the National Credit Union Administration (NCUA), “Credit unions are not-for-profit organizations that exist to serve their members.”
“Like banks, credit unions accept deposits, make loans and provide a wide array of other financial services,” the NCUA says. “But as member-owned and cooperative institutions, credit unions provide a safe place to save and borrow at reasonable rates.”
As a non-profit, a credit union shares its earnings with its members and offers low fees, low-interest loans, and high-yield savings.
Though it can be a nice alternative to a big bank, many consumers shy away from joining one due to negative perceptions. Here are some common myths about credit unions, and the facts to counter them:
Myth #1: I Can’t Join a Credit Union
One of the most common myths is that credit union membership is incredibly exclusive. But the truth about credit unions is that while many are meant for people who work in specific industries or live in certain areas, it’s still likely that there is one that you can join.
Myth #2: They Don’t Come With the Same Perks as Big Banks
Some people may think that credit unions are behind the times and don’t offer the same reach as big banks, or don’t come with the same perks. But that’s not true. There are actually quite a few credit union benefits in this regard.
“Probably the most common myth about credit unions is that they do not have the national service reach of big banks,” says Samantha Paxson, Chief Marketing and Experience Officer for CO-OP Financial Services, a California-based provider of payments and financial technology to credit unions.
“In fact, credit unions can extend their exceptional member service beyond their immediate communities because of the cooperative nature of the industry,” Paxson adds.
In some ways, you might even get more benefits with a credit union in the form of lower fees and competitive interest rates. And if you’re worried about ATM access or mobile technology, credit unions have you covered.
Myth #3: Credit Unions Aren’t as Safe as Banks
Big banks are well-known entities. On top of that, many banks insure up to $250,000 through the Federal Deposit Insurance Corporation (FDIC).
Credit unions aren’t as well-known and don’t have the same coverage, which can lead to people believe they aren’t as safe.
Though your deposits aren’t insured by the FDIC, a federally insured credit union offers a similar kind of insurance for your deposits. Currently, the vast majority of credit unions are federally insured, protecting deposits up to a minimum of $250,000 per individual, according to the NCUA.
They write that “The National Credit Union Administration (NCUA) is the independent agency that administers the National Credit Union Share Insurance Fund (NCUSIF). Like the FDIC's Deposit Insurance Fund, the NCUSIF is a federal insurance fund backed by the full faith and credit of the United States government.”
In other words, your deposits are just as safe. As a member-owned cooperative, a credit union is focused on its members’ needs first.
The Bottom Line
If you’re tired of big banks or want something a little more “local,” you might want to consider a credit union. And if you’re worried about making the jump, many credit unions have switch kits to help you make the transition a bit easier. From a financial standpoint, you just might come out on top.