Personal Finance Tip of the Day

Handy Personal Finance
ISBN: 9781578593224

What is a credit union, and why use one?

  • It is a not-for-profit institution.
  • It offers most of the services of banks.
  • It offers very low or no fees.
  • It pays back members if there is a profit.

A credit union is a not-for-profit institution that provides many financial services of traditional banks, including allowing members to hold deposits, clear checks against checking account deposits, and provide members with credit in the form of loans. In order to become a member, a prospective client should belong to the group in which the credit union is chartered to service. Many credit unions are organized by professions, employers, geographic location, or associations to which one may belong. Prospective members are then allowed to make a nominal deposit, which then gives them access to all of the other services available at the credit union, including obtaining home loans, car loans, short term construction loans, etc.

Credit unions have very low or no fees, since they are not profit-making entities. Whatever profits that are made during the course of the year are paid back to members in the form of interest on their savings and or checking accounts, as well as better terms and conditions on loans.

Credit unions have lower interest rates for loans than banks, lower or no fees for using ATMs, overdrafts, low or no fee checking accounts, low or no minimum balance accounts, as well as personal and local services.

From The Handy Personal Finance Answer Book by Paul A. Tucci, (c) 2012 Visible Ink Press(R) Answers to more than 1,000 answers to questions on personal finance, its history, and managing one's financial life.
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