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Credit unions are the non-profitable organizations providing credits.
They offer a huge range of cost effective services to their members,
which the conventional banks usually cannot compete with. Still credit
unions are not flawless and before you consider a credit union over a
bank, you should be well aware of both its advantages and disadvantages.
Advantages of credit unions
A constituent part - As a customer of a credit union, you will be an
integral part of the organization and will be treated as a member of the
union. You will have a control on the activities and operations of the
institution and can exercise your voting rights to elect the Board of
Directors.
Rate of interest - One of the most notable advantages of any
credit union is the attractive interest rate. Credit unions are not
profit oriented organizations and the revenue earned is directly
forwarded to its members, received in the form of lower rates on loan or
higher rates on savings. Thus, if you deposit money in credit unions,
then the interest that you will receive will be higher than what you
could get from a bank saving account. Moreover, if you are availing a
loan, then the interest charged is quite low.
Community based - Credit unions are operated by members of a
common community or work field. Services are extended by a credit union
to benefit the local community and the depositors residing there. For
instance, membership at a teacher’s credit union is restrained to the
professionals in the educational domain.
Quality services - Credit unions are popular for providing
excellent support to their clients, for they understand that every
account possessor actually comprises a part of the ownership of that
credit union. They always aim for customer satisfaction. However, you
may not always expect reasonable service that is in your best interest
from conventional banks. Disadvantages of credit unions
Limited branch locations and ATM service - Though the community based
focus is the major feature of the credit unions, it is quite
inconvenient while banking with them, due to lesser number of available
ATM and branches. Moreover, many credit unions operate from a single
location and only have few branches in specific areas. However, if you
are residing close to a credit union, this may not be a major issue.
Authenticity - Most of the credit unions are authorized by the
National Credit Union Administration (NCUA), an autonomous government
agency that supervises credit unions. But some credit unions exist
without the approval of NCUA, hence depositing your money there is quite
risky.
Limited services - Most of the credit unions are not that
resourceful to offer a huge range of services to its customers that a
contemporary bank is quite capable to offer. For example, if you aspire
for a large commercial mortgage loan, your city credit union may not be
able to provide you with one.
Non accessibility of finance - Though credit unions provide great
financial support by making you profitable, but depending upon the
situation of the union all of your money might not be easily accessible.
Fortunately, most of the credit unions are backed by their countries,
guaranteeing your investment, even though the credit union you are
associated with is facing major problems.
Other consideration - The credit unions are not authorized by
Federal Deposit Insurance Corporation, most of them are insured by the
National Credit Union Administration, which can allow you to deposit
balances as high as $100,000. However, before opening an account with a
credit union, check properly whether it is insured by the National
Credit Union Administration or not.
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