Earlier, most business owners trusted commercial banks for their financial needs. However, in the recent economic downturn and the collapse of traditional banks, many have questioned whether commercial banks are the most suitable financial mechanism for a business. This question has also arisen due to the increasing popularity of credit unions as the most user-friendly financial institution for business owners.
Many credit unions with business accounts offer numerous benefits to small and medium businesses. But how are these unions different from commercial banks, and what are their advantages? The following article tries to answer these questions.
How are Credit Unions Different from Commercial Banks?
Credit unions are non-profit financial institutions owned by those who use the financial products. The primary difference between a commercial bank and a credit union is the ownership. Credit unions are not-for-profit cooperatives owned and operated by their members. Commercial banks are for-profit institutions owned by stakeholders. These stakeholders may include individuals, corporations, and other entities.
Credit unions are free to make decisions that benefit their members. They don’t have to make decisions solely to please the stakeholders. On the other hand, financial institutions have to keep in mind the interests of their investors and stakeholders. Depending on your financial situation, a credit union can help you save money, get a higher return on your savings, receive a loan at a lower interest rate, and improve your financial well-being.
Why Should You Join a Credit Union?
Credit unions have numerous advantages over other commercial banks that can tremendously help small and medium-sized businesses.
Lower Borrowing Rates:
Credit unions have lower interest rates compared to commercial banks. Credit unions offer various products and services, such as credit cards, fixed-rate mortgages, adjustable-rate mortgages, used car loans, new car loans, home equity loans, and personal loans at lower interest.
There is no denying that many commercial banks also offer loans at competitive rates, but their eligibility depends on your credit score and other factors. On the other hand, credit unions have a lower borrowing rate and have less stringent eligibility criteria.
Lower Processing Fees:
Credit unions have lower processing fees. This includes minimal or no charges for ATM withdrawals or online money transfers. Moreover, many credit unions don’t have a monthly maintenance fee on business accounts. As a business owner, you must process several online transactions. You will incur heavy losses if a bank charges a hefty amount for processing these transactions.
Therefore, having a business account in a credit union can save your business a significant amount of money, and you won’t be burdened with excessive charges for routine banking transactions.
One of the primary advantages of credit unions is their member-owned services. Credit unions identify themselves as a financial cooperative that promotes their members’ economic well-being. Credit unions are member-owned and member-run and function, keeping the best interest of its members.
Insurance Up to $250,000 of your Total Fund:
The National Credit Union Share Insurance Fund insures up to $250,000 of your total funds deposited in a credit union. The National Credit Union Administration (NCUA) manages this fund insurance and guarantees to safeguard your money.
Access to Business Loans:
Credit unions are very willing to work with small and medium-sized businesses because they are deeply invested in the economic well-being of their community. Many also offer emergency loans of up to $5,000 or short-term loans of up to $2,000. This is a very big advantage for businesses that are seeking a loan.
Excellent Customer Service
Credit unions are known for their exceptional service. According to the American Customer Satisfaction Index, 75% of customers were satisfied with the services they received from credit unions. In credit unions, the customers are also the owners; therefore, customer satisfaction is the top priority.
Better Returns on Savings:
Credit unions offer better interest rates on saving accounts than other financial institutions. However, to make a sound decision, compare all the interest rates before finalizing one.
How to Join a Credit Union?
You can join a credit union by visiting a branch or opening an account online. There may be some specific eligibility requirements to join a credit union. For instance, some credit unions may only serve the military community, while others may only serve specific workers or geographic areas. The eligibility criteria will depend on which credit union you want to join.
On the other hand, for some credit unions, the geographic area is not a problem because they are digitally advanced and have a nationwide member base. However, to be a part of a credit union, you may have to pay a small fee or donation between $5 to $25. You can join a credit union by visiting a branch or opening a new account online.
Credit union accounts offer numerous benefits that can positively impact your business’s financial stability. They offer benefits that commercial banks don’t offer. Lower interest rates, higher returns on savings, unique benefits for members, fund insurance, excellent customer service, easy loans for business owners, and lower processing fees are some of the main benefits.
Because the members own credit unions and work for the members, the main priority of these financial institutions is customer satisfaction. As a business owner, you will benefit greatly if you join a credit union. However, it is important only to trust a reputable organization and make your financial decisions wisely.