Credit unions offer unique advantages that can provide greater security and peace of mind during financial downturns. Here’s why a credit union can be better than a bank during a financial crisis.
Benefits of a Credit Union
Member-owned and operated
One of the primary differences between credit unions and banks is their ownership structure. As a credit union, we are member-owned. This means that you become a part-owner when you open a share account at a credit union. In contrast, banks are typically owned by shareholders who may not even be customers of that bank.
This member-owned model can work in your favor during a financial crisis. It allows credit unions to prioritize the needs and interests of their members instead of focusing on maximizing profits for shareholders. This enables us to provide more personalized service and policies that aim to support members through tough economic times.
Not-for-profit status
Credit unions operate as not-for-profit organizations. Unlike banks, which seek to generate profits to pay their shareholders and board members, credit unions reinvest surplus earnings back into the institution and their member-owners. This reinvestment can take the form of lower fees, better earnings rates on share accounts, and lower rates on loans.
In times of financial crisis, these benefits can be crucial. Lower fees and better rates mean you can keep more of your money and reduce the cost of borrowing. This can be especially beneficial if you need a loan to manage financial difficulties or if you want to maximize your returns.
Greater stability and lower risk
Credit unions and banks are insured, with most banks insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per customer. Most credit unions are similarly insured by the National Credit Union Administration (NCUA) for up to $250,000, and many are privately insured, too. However, banks are likelier to have extremely large depositing customers that fall well beyond the insured amount. This can leave the banks scrambling if many wealthy customers withdraw their uninsured funds during a financial crisis.
In addition, credit unions tend to take lower risks compared to banks. They maintain conservative lending practices and focus on member services rather than profit.
Stronger ties to the community
Credit unions are typically community-focused institutions. They often have strong ties to the areas they serve and a deep understanding of the specific financial needs of their members. This community focus can translate into more tailored and supportive services during a financial crisis. Read about how Jovia’s making an impact on the community here.
Personalized service
Access to personalized service can make a big difference in a financial crisis. Credit unions, with their smaller size and member-focused approach, can often provide more personalized service compared to large, impersonal banks. In addition, credit union staff is typically more accessible and willing to work with members on an individual basis to find solutions to financial problems.
Better loan terms
Credit unions typically offer more favorable loan terms than banks, which can be particularly advantageous during a financial crisis. Lower interest rates, reduced fees, and more flexible terms can make it easier to manage debt and maintain financial stability.
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