Thrifty Thinking: Credit Unions

The self-employed now represent 15.5 million workers, an increase of 1 million since May of 2014, which is expected to rise to 40% of the workforce, or 60 million people, by 2020.  It's important that these entrepreneurs, including yourself, know about the benefits of credit unions, which are another viable option when compared to banks, angel investors or VCs.

Credit unions are financial institutions owned and governed by members as a cooperative. All account holders are members, with collective total assets used for financial purposes. Credit unions are not-for-profit entities, meaning that their purpose is to serve the best interests of members rather than maximize profit margins.

 

Since credit unions are for the people instead of for profit, they often offer the lowest loan rates and fees. A recent survey found credit unions offering a nearly 2% lower rate than banks.

A loan from a credit union allows you full control over your business decisions. Many times the venture capital firm, angel investor or even incubator has a say in how you operate and/or may require you to give them shares in your company.

Steve Wozniak was able to get a loan from his own credit union while the company was still based in a garage.

I had a chance to interview Bill Prichard, Senior Manager, Public Relations and Corporate Communications for CO-OP Financial Services to learn more.

What are credit unions and how do they differ from banks?

Credit unions are financial institutions owned and operated by members as a financial cooperative. All account holders are members, with collective total assets used for banking purposes. Credit unions are not-for-profit entities, meaning that their purpose is to serve the best interests of members rather than maximize profit margins.

What are the advantages of credit unions?

In general, credit unions are known for their lower loan rates, lower fees, even greater access to free checking (offered by 70% of credit unions; source: Bankrate). This will vary from credit union to credit union, but the very nature of the credit union as a not-for-profit organization positions it as a better consumer choice. This is also reflected in a higher standard of member care as opposed to bank customer service — in fact, surveyed consumers give credit unions a 93% “highly satisfied” rating compared to 69% for the four major banks (source: Consumer Reports).

How can people make smart choices when choosing credit unions?

Credit union “Field of Membership” is based on such things such as residence and workplace, and there are even those that cater to lower incomes. Virtually anyone can find a credit union near them that they can join immediately. When looking for a credit union, keep an eye out for the “CO-OP” logo to make sure the institution belongs to the largest network of surcharge-free ATMs and shared branches nationwide. CO-OP-affiliated institutions also have access to the latest in mobile, digital and fraud-protection technology available in financial services.