12 Credit Union Benefits That May Surprise You

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by Lindsay VanSomeren

If you’ve stuck with banks, there are a lot of credit union benefits you could be missing out on.

When you think of credit unions, what comes to mind? Do you think of a dusty, outdated building that your parents visited every week when you were a kid? Or maybe some kind of exclusive financial club?

If so, it’s time to revisit credit unions. Sure, they may not have as much hype around them as many traditional banks. But what they lack in marketing budgets they more than make up for with useful credit union benefits. These are real, tangible perks that can help you manage your money better and progress faster towards your financial goals.

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1. You’re a Member, Not a Customer

Banks often play up an image of being an everyday hometown financial institution. But make no mistake: Banks are owned by someone, whether it’s a single person or a group of investors. Either way, it’s a business, and profits come first — often at your expense.

Credit unions work differently from banks. Just like workplace unions are a group of people banded together for the common good, so are credit unions. In this case, it’s a group of people who meet certain membership criteria, such as living in the same region, working for the same employers, or belonging to certain organizations.

Not everyone is eligible to join every credit union, but if you are, you become a member rather than a customer. This means you may see more personalized and better service. You can also vote, and help elect the people who run the credit union. That’s definitely not something you can do at a bank.

2. More Community-Focused 

Since credit unions are not-for-profit organizations and often consist of people banded together from certain regions, credit unions often give back to their community in unique ways. For example, many larger credit unions operate their own community charities designed to provide financial support and education to members of the local community.

3. More Financial Education

Even outside of a credit union’s own charity, you can often find better financial education than at big banks. Many credit unions host regular in-person seminars for members on hot topics like buying your first home, saving for retirement, or setting up a budget, for example.

Some credit unions also offer free personalized financial help. You might be able to get your FICO score for free, for example. Other credit unions offer to have a bank representative sit down with you and go over your finances to see how well you’re doing and where you can improve. This isn’t necessarily a substitute for working with a financial advisor, but if you’re not currently working with one, it can be a great option.

4. Better Rates on Loans

One of the biggest credit union benefits is that you can often get cheaper loans. This is because of its not-for-profit structure: Those savings are passed on to you in the form of lower interest rates, and they may have lower fees as well.

Credit unions usually offer many different loan types, often spanning everything from personal loans to auto refinance loans and even mortgages.

According to the National Credit Union Association (NCUA), credit unions and banks were offering the following average interest rates as of December 17, 2019:

Loan productAverage Credit Union Interest RateAverage Bank Interest Rate
Credit Card11.56%13.56%
30-Year Fixed-Rate Mortgage3.97%4.02%
36-Month Personal Loan9.36%10.18%
Home Equity Loan4.65%5.17%
36-Month Used Car Loan3.47%5.51%
48-Month Used Car Loan3.62%5.56%
48-Month New Car Loan3.41%5.01%
60-Month New Car Loan3.53%5.16%

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5. Better Rates on Deposit Accounts

Similarly, credit unions often pass on their savings to you in the form of higher interest rates on your savings as well. This isn’t necessarily across-the-board on all accounts, however.

Most credit unions require you to open a basic savings account and keep at least a small deposit in it (typically $5) in order to establish your membership. These accounts often don’t pay very high interest rates, but you can often find much better rates with other types of accounts at credit unions.

Share certificates (also known as Certificates of Deposit, or CDs) in particular offer higher interest rates than most banks. Here’s a sampling of average interest rates on certificates of different lengths at credit unions vs. banks, according to the same NCUA data as above:

CD Term LengthAverage Credit Union APYAverage Bank APY
3 months0.54%0.40%
6 months0.90%0.63%
1 year1.32%0.97%
2 years1.56%1.17%
3 years1.73%1.31%
4 years1.88%1.40%
5 years2.06%1.59%

Many credit unions also offer higher interest rates on special “rewards” checking accounts and savings accounts. In particular, credit unions often partner with a company called Kasasa in order to offer special “Kasasa Checking” and “Kasasa Saver” accounts with rates far higher than anything you’ll see at even the best banks.

Make sure you read and understand the fine print for these accounts very well, however. They often come with a lot of requirements in order to earn the higher rate each month, such as making a certain number of transactions, keeping a certain balance level in your account, etc Still, if you’re able to meet these requirements, you could earn a lot of extra money in interest.

6. Loans That Are Easier to Qualify For

Depending on your financial situation, it may be easier for you to be approved for a loan (including car refinance loans) at a credit union than at a bank. That’s because banks often take a holistic approach and really get to know you as a valued member, versus just a customer with a number.

Of course, there are limits. Credit unions don’t give out blank checks to just anyone. You’ll still need to meet certain requirements in order to get a loan. But on the whole, they may be more willing to work with you towards a solution than a bank would.

7. Credit Builder Loans

Along these, lines, many credit unions offer special “credit builder loans” designed to help you build your credit. These loans are usually for small amounts and for short periods of time, so you typically won’t pay out a lot of money in interest for these loans. But as long as you make your payments on time, they’ll add positive information to your credit report, which can help improve your credit score.

These credit builder loans can be especially useful for people who are looking to build up their credit, such as teenagers, college students, or those looking to overcome past financial mistakes.

8. Payday Alternative Loans

A “payday alternative loan” is another handy loan type that some credit unions offer that you won’t find at banks. Just like the name sounds, these loans are meant as alternatives for people who otherwise would turn to a payday loan. Payday loans in themselves are one of the worst financial products out there and are even banned in some cases.

A payday alternative loan from a credit union, however, still offers you short-term cash to tide you over to your next paycheck, but for a cheaper price. Some credit unions restrict payday loans to people who have been a member for a certain number of months, so if you think you may need a payday alternative loan someday, it’s a good idea to join the credit union before you need one.

9. Club Savings Accounts

Do you ever wish you were better at saving up for big purchases, like a vacation, for the holidays, or something else? If so, then you might be interested in a club savings account offered by many credit unions. These accounts are virtually nonexistent at banks.

The details of how these club savings accounts work vary by credit union, but the general idea is this: You agree to set aside a certain amount every month into a special club savings account. You can’t withdraw the money or you’ll face some sort of penalty fee, or perhaps the entire account will be closed out and deposited into your normal checking account. Then, once you hit your goal, the money will become available to you to spend on whatever you were saving up for.

Many credit unions offer Christmas club savings accounts. You can also find vacation club savings accounts or general-purpose club savings accounts, although these are a little rarer. Some credit unions that are focused on teachers, such as Apple Federal Credit Union, may also offer club savings accounts to save a portion of your paycheck for the summer months.

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10. Car-Buying Services

Credit unions are great places to shop around for auto loans. To help out on that front, many credit unions also offer special car-buying services. The details of these programs vary, but they may be able to help you find discounts at local dealerships, expedited financing, and in some cases, you can even buy your car entirely online and have it delivered to your driveway.

11. Shared Branches

One of the most unique credit union benefits is the CO-OP Shared Branch Network that most credit unions participate in. If your credit union is a member of the CO-OP network, you can use any of the 30,000 ATMs or 6,000 branch locations around the country. These locations consist of other credit unions that are in the network, and you can use them just like with your regular branch.

In some cases, there may be a small fee to use a shared branch location. Even so, it’s a great way to get your banking done if you’re away from your small regional credit union. It also truly exemplifies the “we’re-all-in-this-together” feeling that credit unions have.

12. Free Shred Days

Unless you run a business outside of your home, there’s a decent chance you don’t have a shredder available for getting rid of sensitive documents. If that’s the case, then no worries — credit unions often hold free shredding days.

You may be able to bring by your documents on this day (make sure to store them safely until then), or they may even have a box in the lobby where you can deposit your sensitive documents to be disposed of later.

Conclusion

According to the credit bureau Experian, credit unions only financed one out of every five auto loans at the end of 2019. Clearly, credit unions are an underused resource.

Still, it makes sense to shop around at both credit unions and banks when it comes to deciding where to put your money. Consider what you’re looking for, whether it’s the highest interest rate available, a more community-based approach, or something else.

You might find what you need with a bank, but given all of the credit union benefits available, chances are you might find what you’re looking for with one of these institutions instead.

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About The Author


Lindsay VanSomeren

Lindsay VanSomeren is a personal finance expert who has written for many websites such as Credit Karma, LendingTree, The Balance, and Experian. She currently lives in Kirkland, Washington with her husband, two cats, and a dog. In her spare time she enjoys homebrewing, reading, and outdoor adventures.


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