Credit unions are formed and run by associations of people that are formed on the basis of a common goal or criteria. These institutions are open only to its members and one can become a member by fulfilling the qualifications needed by the particular credit union and opening an account with them. There are many local credit unions that operate across the country and you can find out the ones in your area that you can qualify for and become a member to enjoy the benefits.
Though there are some advantages of the larger banks that you may find missing, but the advantages that you can have in the long run, especially in money strapped situations, can be immense. Many people find the friendly atmosphere and the one-to-one relationship really too hard to replace with the business and detached behavior of large banks and financial institutions.
There are, in general several pros and cons of banking with credit unions, and let us take a closer look at some of these.
Credit unions function similar to a bank but are owned by its members and not stakeholders whose primary concern is to earn more and more profits. Banks are generally regulated by the stock market and charge fees on each of the transactions as their aim is to maximize the profit. On the other hand, the aim of a credit union is to maximize the benefits and service level for its members, who are also co-owners of the institutions. Some credit unions also have a voting system for its policies and major decisions.
There are no ATM fees for using the services of a credit union and its overdraft fees are also much lower. However, the flip side is that there are fewer ATMs and hence you need to keep searching for one or use some other banks ATMs, which will again call for some additional costs. However, there are some credit unions that may even reimburse these charges, which again nullifies the negative effect.
Credit unions charge much lower interest loans for bad credit on its loans than commercial banks and financial institutions. At the same time they offer much higher deposit rates as they solely exist for the benefit of its members and not for maximizing the revenue. Even if they do earn profits, it is distributed amongst its members or reinvested into the institution for improving or modernizing its services. Hence they are most cost effective when you need loans and some of the credit unions interest rates cannot go beyond a certain benchmark level, hence you will be protected against rising debt costs too.
A credit union is a good option when you are in need of funds but do not have very high credit scores which may be of interest to the banks. The credit unions pay more stress on the long term relationship with its members than their credit scores to establish the eligibility. Hence you will be able to get loans at lower rates and may not need to consider higher interest private unsecured personal loans at all.
A disadvantage of the credit union loan is the eligibility criteria that often restrict the membership. Hence you will need to do some ground work in identifying those which would accept you as a member.
Another disadvantage with some credit unions may be that the technology that they use may not be very advanced as they may not have huge funds available to modernize their services very often; hence some people find this, a setback.
However, given their advantages, it may be worthwhile to explore the services of those where you can qualify to be a member, as the services can prove really beneficial at a financial crunch situation.