Why Do Credit Union Services Have Much Lower Rates?
Doug Smith

Defined Tag: Credit Union Services.

Credit union services are comparable in scope to those offered by commercial banks. However, a credit union's or thrift institution's members can typically get these excellent services at much lower interest rates (on loans) and much higher interest rates or dividends (paid into savings accounts) than the bank can offer.

These financial cooperatives are run by and for the members, so there are no expensive boards of directors to pay, or investors to satisfy. The low overhead costs enable the thrift institutions to offer the profit back to the members in the forms of low loan interest rates, and as higher dividends paid into their interest-bearing savings accounts.

What's the catch? You have to be a member to use the banking concern's range of financial services. This may sound odd, but you have to be a member of a specific profession, group, employer, or other group of people. Each thrift institution has a charter specifying what group of people it serves. Teachers cannot use the services of the mechanics' financial union, and vice-versa. If you are a teacher, or live in a specific area, then you need to find the credit co-op that services teachers or people in your neighborhood. Check with friends, the phone book, or the internet for a list of professions or groups serviced by thrift banks in your area.

The terminology of the union may be different from your regular bank. Savings accounts are called share accounts, checking accounts are called share draft accounts, and certificates of deposit or CD's are called share term certificates. Regardless of the names, the fees and interest rates to use the services will typically be less than a bank, and sometimes considerably less.

Once you find a credit-based union that shares your profession or other demographic, it should not be difficult to become a member. Prove that you are part of the field of membership, common bond, or bond of association, fill out the paperwork, and wait to be accepted. Chances of acceptance are good, because a thrift union needs more members to participate in the business to keep it running smoothly. With more members, the credit union services can continue to be offered at lower rates.

Copyright 2008 by Doug Smith. All Rights Reserved Worldwide. Unauthorized Duplication Prohibited. Not Intended As Professional Advice.