You might be wondering, what is a credit union? What’s the difference between a credit union and a bank? What are the benefits of becoming a member at a credit union? Keep reading to find out more about:
- What is a credit union?
- The difference between credit unions and banks
- Benefits of becoming a credit union member
- Credit union FAQs
- Telco Credit Union
What is a Credit Union?
Credit unions are different from banks in that they are not-for-profit organizations that exist solely to be of service to their members. Credit unions are member-owned, which means they are owned and controlled by the members who use their services. Typically, a board of directors made of volunteers manages a credit union. This means that your vote matters! These financial institutions work to ensure the well-being of their members.
Credit unions are federally insured, and they tend to be much smaller than banks. This can make your financial experiences feel more personal; an average bank is around double the size of a credit union. Credit unions are nonprofits that are governed by their members. A credit union offers many of the same services that a bank does, including checking and savings accounts, CDs, IRAs, car loans, mortgages, home equity loans, and credit cards. Many people believe that they must belong to the military or work for the government to join a credit union, which isn’t true!
The Difference Between Credit Unions and Banks
Credit unions can provide secure and reliable places to save and borrow money at more reasonable rates. However, like banks, credit unions also provide many financial services and accept deposits as well. The profits made by these organizations are returned back to their members. Members can expect lower loan rates, reduced fees, and higher savings rates as part of their membership in a credit union.
So what’s the difference between a credit union and a bank? Credit unions offer less rigid eligibility requirements, lower interest rates, and greater financial literacy resources than banks do. Plus, deposits are insured in the same way for credit unions as they are for banks. However, credit unions offer limited financial products, and there are fewer physical branches of credit unions.
On the other hand, banks offer resourceful online apps, tools, and features, which adds to the convenience factor of banks. For banks, there are more stringent eligibility requirements than for credit unions. Generally, banks offer higher interest rates and transaction fees than credit unions do.
Choosing between relying on a credit union’s resources and a bank’s resources can be a tricky choice, but it all depends on you and your financial needs. If you’re tired of paying for fees at ATMs or making payments on a savings account, it might be time to switch banks, or move your funds to a credit union altogether. One of the greatest benefits of using a credit union is that they offer higher rates of return on savings accounts, in addition to lower interest rates on loans. Credit unions have become more and more popular over the last few years, because they allow bank customers more options than before.
Benefits of Becoming a Credit Union Member
There are many benefits in becoming a member of a credit union; often, members share interests and enjoy being part of an organization that helps other people with those interests. Other benefits of joining a credit union include help with small business needs, in-school credit union branches, outreach to consumers, and financial education. Because of the collaborative design of credit unions, members appreciate working towards a common goal of financial well-being.
Membership in credit unions can be determined by the field of membership, or the legal definition of who is permitted to join the institution. These parameters differ in some credit unions. You may be able to join a credit union based on several categories: your employer, your family, your geographic location, and membership in a group or groups. Your employer may sponsor their own credit union, allowing you to join. Most credit unions permit existing members’ families to join. Many credit unions allow people to become members that live, work, worship, or attend school in a particular geographic region. Finally, already being a member of a group, like a place of worship, labor union, homeowners’ association, or school may allow you to join a credit union.
Credit Union FAQs
Here are some additional frequently asked questions regarding credit unions:
How did credit unions form?
When a season of failed crops in 17th-century Germany led to widespread poverty, villagers pooled their money in an effort to save themselves from poverty and starvation. They formed a jointly owned mill and bakery that sold bread to members at affordable prices. Savings accounts and small loans also were available.
The modern credit union movement grew out of an idea that people could work together to create solutions to meet their financial needs.
Credit unions were created to enable people to pool their financial resources to help themselves and each other.
What is the credit union philosophy?
In 1935, when credit unions were helping Americans through the Great Depression, the treasurer of a Midwestern credit union said that credit unions were “not for profit, not for charity, but for service,” and that philosophy holds true today. Credit unions continue to look out for their members’ interests and provide a level of service that generally is not available at other financial institutions. Credit unions continue to look out for their members’ interests and provide a level of service that generally is not available at other financial institutions. Whether it’s providing a loan to help a member cover unexpected medical bills, giving financial counseling to a member whose employer closed its doors, or simply offering a better deal on a used-car loan or mortgage, credit unions make a difference for their members and the communities they serve. In 1984, the World Council of Credit Unions approved the nine International Credit Union Operating Principles that remain the cornerstone of the credit union movement. They are:
- Open and voluntary membership
- Democratic control
- Service to members
- Distribution to members
- Building financial stability
- Ongoing education
- Cooperation among cooperatives
- Social responsibility
These principles are founded in the philosophy of cooperation and its central values of equality, equity, and mutual self-help. They express, around the world, the principles of human development and the brotherhood of man through people working together to achieve a better life for themselves and their communities.
Why should I join a credit union?
- Credit unions are focused on people, not profits. Credit unions operate by a “people helping people” philosophy that is hard to find at other financial institutions.
- Financial education is available to all members. Credit unions assist members in becoming better-educated consumers of financial services.
- As not-for-profit institutions, credit unions offer better rates on credit cards—up to two percentage points lower than the average bank card rate.
- Credit unions are available in places where banks typically aren’t, such as community development neighborhoods.
- As a member of a credit union, no matter how much money you have on deposit, you have an equal voice in how your credit union is run.
- Superior service, convenience, and technology. Credit union members receive the service convenience of today’s technology through online and mobile banking.
- Use the credit union services you need. Many credit unions provide online loan applications and remote deposit capture for member’s convenience. Even if you don’t need the credit union’s sophisticated website or 24-hour loan services, you can use the credit union services you need most.
- Many credit unions offer no-surcharge ATMs that any credit union member can use. National shared ATM networks mean you can find ATMs where you live and work.
- Your credit union can put you in business with a small business loan. And some credit unions have established a relationship with the Small Business Administration to expedite loans to credit-worthy small businesses.
Telco Credit Union
Telco Credit Union is a full service not-for-profit financial institution serving over 10,000 members. Serving Tarboro, NC, Rocky Mount, NC, Greenville, NC, and Eastern North Carolina, Telco can help with all your financial needs.
At Telco Credit Union, it is easy to become a member/owner. You can complete a single membership application and make one deposit of $5.00 into a savings account. All you have to do is keep a $5.00 minimum in your savings account. Our motto is “once a member always a member” – it’s as simple as that. Membership at Telco is available to active or retired Selected Employee Group (SEG) employees and their immediate family: this includes a member’s wife, husband, daughter, son, mother, father, brother, sister, grandmother, grandfather, and/or grandchildren. Contact us at Telco for help with your financial needs!