Banks are just one of several financial institutions that offer savings and checking accounts. Credit unions are another alternative that you need to explore. Investing through a credit union can help you achieve your financial goals and your financial independence. Credit unions are not-for-profit financial organizations that are owned by their members. Since they are member-owned, then they operate on the principle of people helping people. Some people have misguided notions about what a credit union is and how it operates. Let’s first clear up some of these uncertainties and then we’ll talk about how investing through a credit union can benefit you and your family.
Exploring the Top 10 Facts About Credit Unions
Fact 1: Credit Unions are Insured
All accounts at banks are insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC was created in 1933 to counter a string of devastating bank failures. It’s an independent agency of the US federal government that monitors banks to ensure that they are financially sound and comply with consumer protection laws. But, FDIC doesn’t oversee credit unions.
However, this does not mean that credit unions are uninsured. On the contrary, credit unions are governed by the National Credit Union Association (NCUA), which is a US government agency. Federal credit unions are subject to NCUA regulations, while state-chartered credit unions are overseen by their respective state’s regulatory board.
Fact 2: Most Credit Unions’ Deposits are Insured Through NCUSIF
FDIC insures each category of bank accounts up to $250,000 per depositor. However, customers can have similar peace of mind when they save with credit unions.
All federal credit unions and many state-chartered credit unions are federally insured through the NCUA’s National Credit Union Share Insurance Fund (NCUSIF). Other state-chartered credit unions might be covered by private deposit insurance instead. However, under NCUSIF, each category of account at a covered credit union is insured for up to $250,000 per depositor.
So your funds have fairly equal protection both at the bank and at a credit union.
Fact 3: Joining a Credit Union is Quite Easy
Although there are eligibility requirements to join a credit union, these are not difficult conditions to meet. Membership in a credit union may be based on family ties, workplace and religious group affiliations, and geographical location.
If you are interested in becoming a member of a credit union, then simply ask about their membership requirements. You will then see how easy it is to become a part of that cooperative!
Fact 4: Once You’re a Credit Union Member, You’re Always a Member
Lifetime membership is one of the benefits of joining a credit union. Once you gain membership in a credit union, then you remain a member regardless of what happens to your original qualifications to join. For example, if you join your local credit union based on geographical proximity, and then you move, you will still retain your membership in that credit union.
Fact 5: Credit Unions Use a Different Jargon
Credit unions are unique as they are owned by their depositors. Therefore the deposit jargon/terminology will be different in a credit union. Deposits in a share account represent that account holder’s part ownership of the credit union. So in a credit union depositors are not referred to as “customers” (as in banks), but as “members” as they cooperatively own the credit union.
Fact 6: Every Credit Union Member Has a Vote
Each member of a credit union is also an owner, so every member has a vote. The members then decide who sits on the board of directors, and also vote on key matters affecting the cooperative.
Fact 7: A Share Account is a Requirement to Join a Credit Union
Yes, a share account is a prerequisite to join a credit union. All credit unions require that you maintain a share account with a minimum balance – even if you just want a loan. This minimum balance can range from $1 to $50, with the minimum balance requirements tending more to the lower end of the scale.
Your share account is similar to a savings account at a bank. The difference is that it pays dividends and not interest. Your share account balance represents the value of your part ownership of the credit union.
Fact 8: Your Funds at the Credit Union are Accessible via ATMs
Are you worried about not having easy access to your funds if they’re in a credit union account? That’s not a problem because many credit unions belong to nationwide ATM networks. You also get access to fee-free ATMs around the country. So you don’t have to worry about having ready access to your funds.
Fact 9: Credit Unions May Share Branches
You are likely accustomed to banks and their mega offices. However, since credit unions tend to be smaller and are not-for-profit institutions, then you may find that many small credit unions also share their branch locations. This gives their members easy and convenient access and also reduces the overheads of all the credit unions. Which then means more benefits for the members.
Fact 10: Each Credit Union is Unique in Its Product Offerings
No two credit unions are alike, as each credit union offers its set of products to its members. Larger credit unions may offer services that are similar to banks’ product lines. However, this may not be the case with smaller credit unions. For example, some small credit unions may not offer mortgages or mobile banking apps. Even large credit unions may restrict some forms of lending such as to large-scale commercial enterprises. But, what credit unions may lack in a variety of services, they compensate for it with attentive and personalized service.
How Do Credit Unions Generate Revenues?
At first, credit unions may seem like banks. Both financial institutions hold deposits, make loans, issue checks, and ATM cards, and they also offer investment services. However, the real distinction between banks and credit unions has less to do with the services they provide. It’s all about how each institution is operated.
Banks are for-profit companies and they generate revenues through collecting interests on loans, as well as account fees, and then reinvesting the funds to earn more profits. As for-profit entities, they also pay state and federal taxes.
However, credit unions are not-for-profit institutions. When you hold an account in a credit union, your mandatory savings account acts as your part ownership of the institution. Since credit unions are owned by their members, then all profits earned are reinvested and also paid back to its owners as dividends. As not-for-profit institutions, credit unions don’t pay state or federal taxes, so they can charge lower interest rates than most banks for their services.
Credit unions are financial cooperatives and are generally formed among a group of persons that share a common bond. This bond may be based on their place of employment, religious associations, military service, or geographical locations.
Credit unions are becoming more popular in recent years. According to the World Council of Credit Unions (WOCCU), almost 90 million Americans are credit union members. Also, credit unions account for more than $615 billion in savings. Furthermore, there are over 46,000 credit unions with approximately 172 million worldwide.
Some of the Advantages of Joining Credit Unions
So why should you join a credit union? Well, these institutions tend to have a long tradition of trustworthiness, longevity, and stability in the financial sector. They provide a good alternative to your traditional banks.
Here are some advantages of credit unions:
- They are community-based and are owned by their members. So their boards make decisions that benefit their owners.
- Credit unions also tend to have specialized financial products to suit the unique needs of their members.
- Credit unions are known for their attractive loan rates and low service fees that may even surpass the local banks.
We invite you to join the Riegelwood Federal Credit Union to begin to experience some of these benefits. Now let’s further delve into all the reasons why credit unions are a good idea!
Are Credit Unions a Good Idea?
Credit unions are excellent financial institutions that offer a unique experience to each member. Here are a few reasons why you should join a credit union:
Experience Friendliness and Accessible Services
Large financial institutions can appear soulless, cold, and distant in their interactions with customers. Oftentimes, bank managers don’t have sufficient authority to make decisions on a personalized basis.
On the other hand, credit unions are often friendlier, as they care about your business. You are more than a number: you are a valued member and owner! Plus, personnel and products are completely accessible once you join a credit union.
No Corporate Structures: Credit Unions are Cooperatives
Credit unions are financial cooperatives – unlike huge banking corporations. Their goal is not to make more money at their customers’ expense. Credit unions don’t have customers: they serve the best interests of their members/owners.
Another feature of credit unions is that they are not only run by their members, but everyone has a say in the governance process. So credit unions seek to make decisions that benefit all members and not any special interest groups.
Credit Unions Offer Similar Banking Services
You’ve got nothing to lose as your local credit union offers the familiar checking, savings, loans, and investment options. So you can go ahead and make the switch!
Credit Unions Offer Better Rates
Member-owned credit unions don’t seek to make huge profits. They tend to offer higher rates on savings accounts and the interest rates on their loans tend to be lower than banks. So with a credit union, your money grows more and faster. And this growth is accessible to all – not just those with huge account balances.
Extra Services for Members to Enjoy!
No two credit unions are alike when it comes to extra services for their members. From comprehensive ATM access to discounted amusement park tickets, your local credit union has you and your family’s interests at heart. Most credit unions’ services emphasize those that enrich their communities and improve the financial education of its members (such as free classes and educational services).
So skip the long lines, the fruitless calls to unresponsive customer services over the same issue, and join your local credit union today!
How Much Do You Need to Start a Credit Union Account?
Opening a credit union account is simple and cost-effective. You can open a savings (or shares) account with anything from $25 to $100. This money will serve as your deposit and you must ensure that you maintain the minimum balance to avoid and/or reduce any fees.
Investing Through a Credit Union: Mutual Funds
A mutual fund is probably the most popular way to invest through a credit union. A mutual fund uses a pool of money from individual investors to buy many stocks, bonds, or other securities via a professional investment manager.
The amount of money you invest in a fund is measured in shares or units and they are priced daily (just like a stock or a bond). We have several types of mutual funds: stock, bond, and money market funds.
A mutual fund has a greater buying power and can easily diversify its holdings. It also benefits from professional investment management from a registered investment adviser. These advisers usually have better research and investment capabilities than a single investor.
Advantages and Risks of a Mutual Fund
Mutual funds are meant to make investing easier (you invest in a pool) and safer (the risks are diversified). You also get professional investment management, and you can choose to invest according to your unique goals (like homeownership). Also, you can choose to reinvest dividends or choose to get dividend checks.
But, there are also associated risks. All investors in mutual funds must be aware that there will be fluctuations in the return and share value. Plus, mutual funds experience the same risks as the stocks and bonds that are in that fund.
The Total Return on a Mutual Fund
The performance of a mutual fund is dependent on the total return. The total return consists of the dividend income and the changes in the fund’s Net Asset Value (NAV). The dividend income is received monthly. The NAV changes each day and is found by dividing the total value of the fund’s securities by the number of shares.
Begin Investing Through Your Credit Union Today!
Your local credit union will likely have several savings and investment products. So you can start investing through a credit union today. Investing helps to secure your future and also helps you to achieve significant life goals like home ownership, children’s college education, and retirement. So contact Riegelwood Federal Credit Union today to discuss the best investment tools available to secure you and your family’s future.