Are you feeling disenchanted with the high fees your bank is charging? Or are you looking for a new way to make your money work for you, while still having easy access to your funds?
Switching to a credit union may be the solution you're looking for.
As the largest credit union in Pennsylvania, we believe strongly in what credit unions can do for members. So, we offer this primer to show why credit unions are smart alternatives to banks, including the similarities between and differences of banks and credit unions, the benefits of credit unions, and the reasons you should switch to a credit union.
What is a Credit Union?
Credit unions and banks are similar in one important way: both offer their members or customers valuable financial products. These products span a wide range and may include checking and savings accounts, certificates of deposit, loan products, credit cards, and access to funds via ATMs or electronically.
One key difference is who owns the institution and benefits from you banking there. Unlike banks, credit unions are member-owned and exist to serve members, not drive profits for a bank owner or stockholders.
And like banks, credit unions do take precautions to make sure your money is safe.
Federally insured credit unions – accounting for about 98% of all U.S. credit unions – offer you a safe place to deposit funds, just like a bank does. The National Credit Union Administration Share Insurance Fund insures credit unions and provides the same protections that the FDIC provides banks: insurance coverage of at least $250,000¹ per share owner, per insured credit union, for each account ownership category.
Profits, Purpose, and Structure of Banks vs. Credit Unions
When you look at the structure of a bank, you’ll see that they are for-profit businesses that are held by either private owners or stockholders. Therefore, banks concentrate on earning profits, which are distributed back only to their owners, not their customers. Since owners and stockholders generally want to make the largest profit possible, that profit often may come by skimping on customer service, charging higher interest rates on loans, and offering fee-based checking accounts.
In comparison, credit unions are not-for-profit and member-owned. Each member has an ownership stake in the organization. Credit unions generally have two overarching goals:
- Provide members with affordable, easy-to-obtain services
- Redistribute profits back to members in the form of lower fees and enhanced services
Credit unions work diligently to serve their members, not themselves. A credit union’s surplus earnings are returned to members, sometimes in the form of higher interest rates on savings accounts, discounted rates on loans, or additional banking services. Some credit unions also provide benefits such as free financial wellness resources, discounts on other products or services, or college scholarships.
As financial cooperatives, credit unions follow Cooperative Principles. As defined by the National Credit Union Foundation, these include:
- Voluntary & open membership. Membership is open to anyone within the credit union’s field of membership without discrimination.
- Democratic member control. Each member has a voice as to the decisions that are made.
- Member economic participation. Members benefit from the credit union's profits in proportion to their relationship and use of products and services.
- Autonomy and independence. As autonomous entities, it’s the members who control the organization, not outside stockholders
- Education, training and information. Credit unions understand the importance of providing training to members, the Board of Directors, employees, and the general community, especially in the area of financial wellness.
- Cooperation among cooperatives. Working together is the key to a credit union’s success. The CO-OP Network, which gives credit union members wide and free access to ATMs, is an example of credit union collaboration.
- Concern for community. Credit unions focus on members, but they also help the larger community, understanding that a thriving community will help the credit union and its members become more successful.
- Diversity, equity, & inclusion. Credit unions understand their responsibility to build and serve more diverse, equitable, and inclusive communities.
Credit Union Eligibility
While anyone can join a bank, credit unions have unique fields of membership. In other words, because credit unions serve specific groups and are owned by the members who use their services, there are rules pertaining to who can join.
Learn how you can join Pennsylvania's digital-first credit union, PSECU.
Credit Union Account Accessibility
In the past, accessibility was sometimes considered a limitation of credit unions – but no longer. Technology has opened the door for easy banking without ever having to leave your home. Digital banking services allow you to manage your money your way.
In addition, some credit unions have opted to share ATMs, offering members more convenient access to both cash and services nationwide. Through PSECU's ATM network, for instance, members have access to 85,000+ surcharge-free ATMs worldwide.
What Benefits Do Credit Unions Offer?
Frequently misunderstood as exclusive – and perhaps elusive – organizations, it should be now clear that credit unions are very accessible. Modern credit unions provide an impressive array of services and offer many benefits. If you’re wondering whether credit unions are better than banks for your financial situation, this list of benefits may help you decide.
Personalized Service
Do you want to feel like more than a number? Since credit unions exist to serve their members, credit unions typically offer more personalized attention.
It’s hard to put a price on developing a working relationship with a trusted financial institution and customizable service is something that big-name banks can’t always offer.
Member-Owned
One of the main benefits of credit union membership is that credit unions are member-owned. The goal of a credit union is to provide financial services at a reasonable cost – not to charge members with fees.
As a result, they have the flexibility to decide how much they want to charge for their products and services. And management is dedicated to taking revenues and reinvesting them into services for members or minimizing members’ costs. That can add up to big savings for members.
Better Rates Across Product Lines
Need a little more bang for your buck? Credit unions may provide just what you’re looking for. Because credit unions are not-for-profit organizations, they pass their financial benefits on to their members. In contrast, banks need to turn a profit for owners, so they’re less likely to provide financial incentives to customers.
Credit unions offer the same financial products as banks including mortgages, personal loans, car loans, and credit cards. But at credit unions, you’ll find comparatively lower rates.
When you’re paying interest on an auto loan for 60 months or a mortgage for 30 years, getting the lowest possible interest rate makes a significant impact on monthly payments and the overall interest you pay. This makes credit unions an appealing choice for loans and lines of credit.
So, if you’re in the market for a loan, or simply want your money to work harder for you, check out the competitive rates at a credit union, like PSECU.
Lower Fees
If you’re looking to save on fees, you should consider a credit union. With a plethora of accounts requiring no minimum balance and the absence of monthly service fees, you can recognize significant savings over the course of a year when you choose a credit union.
If you find a bank offering free checking, is it really free? Or are there numerous “fine print” qualifications? Are you restricted on the number of ATM withdrawals you can make per month? Can you write only a certain number of checks monthly before you’re obligated to pay a fee? Are you required to have direct deposit set up?
Credit unions offer several account options, often with fewer restrictions, obligations, and complications.
Unexpected Perks
The benefits credit unions offer aren’t just financial. Other nontraditional perks that credit unions may offer include:
- College scholarships for high school students
- Product discounts for members
- Free financial wellness resources for kids and adults
- Donations to the communities they serve
Should I Switch to a Credit Union?
Credit unions are a great option for many people, and they provide a range of perks that big banks simply can’t, such as a more personalized banking experience, lower rates on loans, and higher rates on savings accounts.
Being part of a larger credit union that’s working to help its members achieve their financial goals isn’t insignificant. Working together to make spending and saving easy, cost-effective, and rewarding is what credit unions are all about.
It’s easy to find a home at a credit union and joining one can be simple. But it’s important to find one that offers the services you need and the convenience you desire. As a safe, reliable alternative to banks, credit unions can help you take the next step toward establishing a solid financial future.
What Are the Benefits of Joining PSECU?
PSECU, founded nearly 90 years ago by 22 state employees, has grown into the largest credit union in Pennsylvania. Membership extends beyond state employees to include students, faculty, and staff at many Pennsylvania universities and colleges, as well as hundreds of businesses that offer PSECU membership as an employee benefit. We have more than 575,000 members and $8 billion in assets, giving us the ability to provide superior financial products, online tools, financial wellness resources, and top-notch member service.
We also offer scholarships to members graduating from high school, a wide variety of lending products, and opportunities to earn cash rewards. With our Founder’s Card, you can earn 2%2 or 1.5% cash rewards on every purchase, every time. And with our debit card rewards, you can earn $.05 or $.10 on eligible purchases3 when you pay with your PSECU debit card.
At PSECU, our Members Achieve More. We’re committed to giving back to our community and helping you achieve your financial goals. It’s what makes us different. We work as your trusted financial partner to make smart decisions that help your money work harder and smarter for you.
There are many ways for you to join PSECU and to begin taking advantage of the services we offer. If you’re ready to take the next step, we’re here to help. It’s never too late – or too early – to invest in your future. Luckily, PSECU makes it easy for you to do just that. Learn how you can become a member today.
1All PSECU deposit shares, including checking, Regular, additional savings, money market and certificates, are federally insured by the National Credit Union Administration (NCUA) up to $250,000, the maximum allowed by law. In addition to the $250,000 of insurance provided on an individual account or combination of individual accounts, you are also insured up to $250,000 for any combination of accounts you may hold jointly with other individuals.
2You can earn 1.5% cash rewards on purchases. You can earn 2% cash rewards on purchases if you maintain a PSECU checking account and qualifying monthly direct deposit(s) of at least $500. Some exclusions may apply. See the Visa® Founder's Card and Visa® Alumni Rewards Card Rewards Program Terms and Conditions for full details.
3You can earn $0.10 cash rewards on eligible purchases of $10 or over with a PSECU checking account and one or more qualifying monthly direct deposits totaling at least $500. You can earn $0.05 cash rewards on eligible purchases of $10 or over for accounts with a PSECU checking account. Certain restrictions may apply. See the Visa® Debit Card Rewards Program Terms and Conditions for full details.