November 4, 2019
Every dollar that you make, save, give or spend is a financial investment, but is it a smart investment that will benefit you? January 2020 is the beginning of a new year and a new decade. Start it by making certain that the things you’re investing in will reciprocate by investing back in you.
Take a serious look at your local financial institutions. Do you find yourself asking, "What is a credit union?” or “How is a credit union different from a bank?” The answer is simple. We’d say that the purpose of credit unions is to create a like-minded community committed to making your financial life better, easier and a lot more secure.
Are Credit Unions Really Worth the Hype?
Credit unions are not-for-profit cooperatives. You may be unfamiliar with the idea of the cooperative business model, but it’s a really simple concept. Basically, the business is owned and controlled by the members — the same people who have membership to use the business’ services.
Credit unions take the idea of a bank and use the cooperative business model to operate. We’re made up of members—regular people just like you—who share something in common. We all work in, live in or have other connections to a certain geographical place, group or employer, for example.
This tightly bound network makes credit unions not only community-based but also community-centric. After all, we’re not here to expand our vision to the whole world and make money off thousands of new account holders. We exist to help our neighbors establish and grow financially stable lives.
As financial cooperatives, credit unions pool together resources to provide all of the traditional banking services their members expect to enjoy—things like savings accounts, checking accounts, loans and mortgages. What’s more, because we’re nonprofits, all excess money made throughout the year gets passed on to our members — that means money in your wallet.
Here’s How Credit Unions Invest in Their Members
The difference between a credit union and a bank begins with the distinction between members and customers:
- You join a credit union and become a member—a member who gets a vote in the operations of the union and has a tangible stake in the company.
- You do business with a bank and become a customer—a customer with limited input.
This is significant because it establishes where all the profit goes: Either it’s invested in delivering more financial perks for you and your fellow members OR it lines the pockets of wealthy C-suite bank executives. Your pick.
Bank is a Four Letter Word
As nonprofits, credit unions reserve earnings for the benefit of their members. That’s why lending interest rates on loans, mortgages and even credit cards are often lower at credit unions than they are at banks. It’s also why dividend earning rates on savings are often higher at credit unions than they are on comparable interest rates at banks.
You earn more on your savings investments and pay less for money that you borrow. Why? You’re a member, so you are part owner of the credit union, and the credit union's profits are used for your benefit.
At banks, the entire system is flipped on its head. Their objective is to generate profits from investments and lending to keep boards, investors and financiers happy with a constantly growing supply of dividends. To feed that demand, banks are constantly searching for customers. To recruit those numbers, they often attempt to substitute convenience for more desirable financial terms — and then switch to more fees and worse rates after you’re in.
Make Your Money Go Further in the New Year
At credit unions like La Capitol, we understand that creating a well-defined, financially beneficial environment for our members serves everyone. Perks remain lucrative for our entire membership, and our organization remains stable. Members receive dividends each year, and the better the credit union does, the better each member does as well.
It’s a cleaner, fairer and more honest way of handling your money and ensuring that it does the most good for you. If you’re ready to make the jump, come see us at La Capitol Federal Credit Union, or visit our website to learn more.