Saturday, September 17, 2016

Finance Basics - Banks vs. Credit Unions

For years, the only way to handle your money was through a traditional bank.

These days, we have a multitude of different avenues to meet our financial needs.  One of those is a Credit Union.

Credit Unions are non-profit, depositor-owned financial institutions.  Let's break that down.

Credit Unions are non-profit.  Because of the structure of a Credit Union, they do no generate profits, but rather any earnings that are not earmarked for their operating budget are given back to the depositors by way of dividends.  Some give these dividends on an annual basis, others give them on a monthly basis.

Credit Unions are depositor owned.  This means the only qualification to own shares in a Credit Union is to have money in an account with them.  Your checking and savings account balances make customers shareholders in the Credit Unions.  This means the employees should be looking out for the customer's best interest - not someone who owns actual stock or bond shares in the financial institution.

Credit Unions are smaller, and, depending on their size, have the opportunity to get to know you better.

One major drawback of  Credit Unions is there must be, by law, a means of limiting the scope of membership with the credit union.  Some larger companies or a combination of school districts have their own Credit Union for their employees.

Others, however, have branched out, which means it allows for more people to be able to join the Credit Union, move their money over, and enjoy the benefits associated with it.  For instance, Motorola Employees Credit Union changed to TruWest and now covers a geographic range using zip codes.  Anyone living within the zip code they cover is now allowed to move their money over and join the Credit Union.

TruWest also has a relationship with LPL Financial which can provide additional assistance with regards to investing and IRA needs for a reduced fee.

The only really big drawback I've found is if you want to purchase U.S. Savings Bonds - or redeem them, you still need to go through a bank.  Also, international currency is another drawback that is not covered at Credit Unions.  However, if you are looking for somewhere to stash your money, you may want to look into the local Credit Unions to see if you qualify for any of them.

Oh, and there is insurance from the Federal Government to cover your deposits.  Another bonus.

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