Credit Unions Are Cooperatives, Not Corporations

The 2023 failures of Silicon Valley Bank and Signature Bank have been in the news a lot recently, and it can make people nervous about where they put their money. When you deposit your money in an account, it doesn’t just sit there. The financial institution uses it to make investments, which is why they pay interest (in the case of a bank) or dividends (for credit unions). Both of the banks that failed had high exposure to risky investments. 

Unlike banks, which are for-profit entities, credit unions are not-for-profit, and their members are their shareholders. So the credit union’s goal is to pass any profits back to their members through interest rates, lower costs, and other benefits. Because they’re owned by members, account holders get to have their say in how the credit union manages their money. As member-owned, not-for-profit institutions, credit unions generally have less of an incentive to go after risky investments. And their members can weigh in, voting in the board that makes money-management decisions.

No Money Lost from Closing Credit Unions 

Like banks, credit unions are insured. Some are insured federally by the National Credit Union Administration (NCUA), and some are insured privately. RMCU’s members chose private insurance with American Share Insurance. That means that each account is insured for up to $250,000. 

Much the same way that credit unions are member-owned, American Share is owned by the credit unions it insures. No credit union member has ever lost money in an American Share–insured deposit. 

You Make (and Save) More Money at a Credit Union 

Credit unions offer credit cards, just like other banking institutions. But unlike a traditional bank, credit union interest rates tend to be significantly lower. According to the NCUA, at the end of 2022, the average interest rate on credit cards through credit unions across the country was 11.96%, compared to an average of 13.34% with banks, though it isn’t uncommon to see rates even higher than that. Plus, credit unions typically don’t charge high fees if there is a missed or delayed payment.

At a credit union, checking and savings accounts, CDs, and money market accounts usually pay their members a higher interest rate than a traditional bank. For example, the national average dividend rate for a five-year CD with a credit union is 2.33%, compared to 1.58% for banks.

Credit union interest rates on personal, home, and vehicle loans typically have a lower interest rate, too. The profit that credit unions make will go back into its members’ pockets through these interest-rate savings. Because their goals are member driven instead of profit-driven, credit unions will look more at your ability to repay as a whole instead of simply basing your loan approval on your credit score and income. Credit union auto loan rates, on average, were over 1% lower than at banks in 2022.

Credit Unions are Part of the Community

One thing many members note is that it feels like they are a part of the family. Credit union employees are encouraged to maintain personal relationships with their members. This helps members feel more appreciated, and it helps them feel like more than a number. Credit unions often try to foster this family-friendly environment by holding or sponsoring events, such as Easter egg hunts and neighborhood luncheons. 

Credit Unions are a part of the community they serve. They are not only there to provide for their members in the area but also to help in the community as well. Often, credit unions will offer some education programs and services, like RMCU’s Money Mastermind course. Most credit unions will sponsor scholarships for education available to local students.

Put your money where it can best help you and the community you live in by banking at your local credit union instead of a corporate bank. Not only will you save more money on interest rates and fees, but you will also make more on your investments and invest in your community at the same time.