What is the downside of a credit union?

 Introduction

Credit unions are almost always associated with being the good guys when it comes to banking and lending institutions, but they aren’t all that different from the big banks most of us use on a daily basis. In fact, credit unions have some downsides that people often don’t think about. In this article, I’ll discuss the potential downsides of credit unions and whether or not they’re worth your time and money.

What is the downside of a credit union?

The answer to that question will depend on what you mean by credit union. To most people, credit unions are synonymous with financial cooperatives. These are organizations, owned and controlled by their members, who provide financial services such as checking and savings accounts to their customers. They're also sometimes referred to as banking cooperatives or community banks.

If you have an account at your local credit union, it can be a great place to do business because they tend to offer more customer-centric products and services than bigger banks or traditional lenders do. You can often access ATMs for free if there's not one nearby. Your monthly service fees may be lower than at big banks (some don't charge them at all), too.

Are Credit Unions Right For You?

Credit unions have been around for more than 100 years, but they're still not nearly as common as banks. The result: If you haven't considered joining one, there are many things you might not know about them. In an effort to shed some light on what exactly credit unions are and whether or not they can benefit you (because they certainly can), we put together some quick answers to some questions that people often ask. Here's what we've learned: Credit Unions Aren't Banks That Don't Have High Interest Rates Credit unions are basically cooperatives for banks -- which means if your bank is ever in trouble, your money isn't protected by FDIC insurance. Instead, it's backed by other credit union members' funds.

Credit unions may have lower interest rates than banks, but that's not necessarily enough to make them worth joining. There are some important differences between a credit union and your bank that you should know about before joining. Credit unions are owned by their members (and their customers) and work like cooperatives. Banks are publicly traded companies with fiduciary responsibilities to maximize shareholder value at all costs, even if it means jacking up rates or fees on existing customers.

 While some banks (primarily online-only or smaller institutions) do compete on interest rates, it’s important to remember that they’re doing so because they can afford to—the law doesn't stop them from using tactics like overdraft fees and mandatory insurance policies to boost profits instead.

The Pros of Credit Unions

Credit unions offer great interest rates and low fees, which make them ideal for saving money. But it’s their friendly customer service that will win you over in no time. Unlike big banks, you can often walk into a credit union to meet with management or get advice on budgeting and saving—many people believe it’s one of the biggest benefits of joining. Since they’re not focused on maximizing profits, many small business owners who don’t qualify for loans from traditional banks turn to credit unions first. Even if you do need financial assistance from an institution like your local bank, some will work with both entities to provide options you can afford.

What are some advantages to joining a credit union? For one, you get more bang for your buck. Credit unions generally provide better interest rates than traditional banks and often offer lower fees, such as no-fee checking accounts. Some even offer low-rate mortgages, auto loans and college savings plans, plus they have perks like free ATMs across the country, free bill pay and ample member support. Many are willing to work with people who may have struggled with debt in the past—not an option with many banks that won't even accept applications from those who are considered subprime borrowers.

The Cons of Credit Unions

When you’re looking to get started with your first financial institution, it can be tough to decide which one is right for you. There are many different benefits offered by credit unions including lower fees and more competitive interest rates, but they aren’t perfect. Some people choose banks over credit unions because they don’t like their minimum deposit requirement or other requirements that may limit who can apply. It is important to evaluate all of your options before making a decision on where to open an account.

A credit union typically requires that members share some type of common bond, whether they work at the same company or live in an area. This doesn’t mean you can’t open a savings account there, but it does mean that you may not have access to as many financial services as you would through another bank. On top of that, if you join your local community-based CU, then you may not be able to apply for loans outside its membership area. For example, if it’s based in San Diego but has branches throughout California and one in Las Vegas and Salt Lake City, then loan approval might be limited to California and Nevada. If you want something from outside those areas (say Texas or Montana), then your application might get rejected.

How to Choose a Credit Union

It’s important to know what you want in a bank before you start comparing them. If price is your most important factor, then you need to look at both banks and credit unions. If speed and convenience are more important, then your search should be limited to banks. And if social responsibility matters most, then only consider credit unions.

Credit unions are not-for-profit financial institutions owned by their members. Compared to banks, which are for-profit companies that make money off loans and investments, credit unions exist to offer affordable loans and savings products to their members. Members also earn dividends on deposits up to a certain amount. However, there are some disadvantages you should be aware of before joining one.

Conventional wisdom says that banks offer better interest rates, higher liquidity and more consumer protections than credit unions. While these are all true in some cases, it’s not always cut-and-dried; if you’re looking for an institution that offers lower fees, local community support and a hands-on approach to your finances, then consider a credit union. Don’t want to spend months researching your options? We did that for you. Based on our own research and reader feedback, here are five reasons why we think using a credit union is worth checking out: 1) Credit unions are usually smaller institutions with localized branches.

How They Stack Up Compared to Banks

There are several potential drawbacks to joining a credit union over opening an account at your local bank. One drawback could be that, depending on where you live, there may not be any options available to you in your area. Credit unions are smaller institutions and tend to operate locally; banks, on the other hand, often operate nationally or even internationally. That means that sometimes you might have better options with a bank if none of your local credit unions offer products or services that appeal to you.

Credit unions have several advantages over traditional banks. One, they’re not-for-profit organizations, so they’re not beholden to shareholders or stockholders. Two, they use their earnings to give customers lower interest rates and other perks—including higher savings yields and lower fees.