Are you feeling disenchanted with the high fees your bank is charging? Or are you looking for a new way to make your money work for you, while still having easy access to your funds?
Switching to a credit union may be the solution you're looking for.
As PA's digital-first credit union, we believe strongly in what credit unions can do for members. So, we offer this primer to show why credit unions are smart alternatives to banks, including the similarities between and differences of banks and credit unions, the benefits of credit unions, and the reasons you should switch to a credit union.
What is a Credit Union?
Credit unions and banks are similar in one important way: both offer their members or customers valuable financial products. These products span a wide range and may include checking and savings accounts, certificates of deposit, loan products, credit cards, and access to funds via ATMs or electronically.
One key difference is who owns the institution and benefits from you banking there. Unlike banks, credit unions are member-owned and exist to serve members, not drive profits for a bank owner or stockholders.
And like banks, credit unions do take precautions to make sure your money is safe.
Federally insured credit unions – accounting for about 98% of all U.S. credit unions – offer you a safe place to deposit funds, just like a bank does. The National Credit Union Administration Insurance Fund insures credit unions and provides the same protections that the FDIC provides banks: insurance coverage of up to $250,0004 per share owner, per insured credit union, for each account ownership category.
Profits, Purpose, and Structure of Banks vs. Credit Unions
When you look at the structure of a bank, you’ll see that they are for-profit businesses that are held by either private owners or stockholders. Therefore, banks concentrate on earning profits, which are distributed back only to their owners, not their customers. Since owners and stockholders generally want to make the largest profit possible, that profit often may come by skimping on customer service, charging higher interest rates on loans, and offering fee-based checking accounts.
In comparison, credit unions are not-for-profit and member-owned. Each member has an ownership stake in the organization. Credit unions generally have two overarching goals:
- Provide members with affordable, easy-to-obtain services
- Redistribute profits back to members in the form of lower fees and enhanced services
Credit unions work diligently to serve their members, not themselves. A credit union’s surplus earnings are returned to members, sometimes in the form of higher interest rates on savings accounts, discounted rates on loans, or additional banking services. Some credit unions also provide benefits such as free financial wellness resources, discounts on other products or services, or college scholarships.
As financial cooperatives, credit unions follow Cooperative Principles. As defined by the National Credit Union Foundation, these include:
- Voluntary & open membership. Membership is open to anyone within the credit union’s field of membership without discrimination.
- Democratic member control. Each member has a voice as to the decisions that are made.
- Member economic participation. Members benefit from the credit union's profits in proportion to their relationship and use of products and services.
- Autonomy and independence. As autonomous entities, it’s the members who control the organization, not outside stockholders
- Education, training and information. Credit unions understand the importance of providing training to members, the Board of Directors, employees, and the general community, especially in the area of financial wellness.
- Cooperation among cooperatives. Working together is the key to a credit union’s success. The CO-OP Network, which gives credit union members wide and free access to ATMs, is an example of credit union collaboration.
- Concern for community. Credit unions focus on members, but they also help the larger community, understanding that a thriving community will help the credit union and its members become more successful.
- Diversity, equity, & inclusion. Credit unions understand their responsibility to build and serve more diverse, equitable, and inclusive communities.
Credit Union Eligibility
While anyone can join a bank, credit unions have unique fields of membership. In other words, because credit unions serve specific groups and are owned by the members who use their services, there are rules pertaining to who can join.
Learn how you can join Pennsylvania's digital-first credit union, PSECU.
Credit Union Account Accessibility
In the past, accessibility was sometimes considered a limitation of credit unions – but no longer. Technology has opened the door for easy banking without ever having to leave your home. Digital banking services allow you to manage your money your way.
In addition, some credit unions have opted to share ATMs, offering members more convenient access to both cash and services nationwide. Through PSECU's ATM network, for instance, members have access to over 70,000 surcharge-free ATMs nationwide1.
What Benefits Do Credit Unions Offer?
Frequently misunderstood as exclusive – and perhaps elusive – organizations, it should be now clear that credit unions are very accessible. Modern credit unions provide an impressive array of services and offer many benefits. If you’re wondering whether credit unions are better than banks for your financial situation, this list of benefits may help you decide.
Do you want to feel like more than a number? Since credit unions exist to serve their members, credit unions typically offer more personalized attention.
It’s hard to put a price on developing a working relationship with a trusted financial institution and customizable service is something that big-name banks can’t always offer.
One of the main benefits of credit union membership is that credit unions are member-owned. The goal of a credit union is to provide financial services at a reasonable cost – not to charge members with fees.
As a result, they have the flexibility to decide how much they want to charge for their products and services. And management is dedicated to taking revenues and reinvesting them into services for members or minimizing members’ costs. That can add up to big savings for members.
Better Rates Across Product Lines
Need a little more bang for your buck? Credit unions may provide just what you’re looking for. Because credit unions are not-for-profit organizations, they pass their financial benefits on to their members. In contrast, banks need to turn a profit for owners, so they’re less likely to provide financial incentives to customers.
Credit unions offer the same financial products as banks including mortgages, personal loans, car loans, and credit cards. But at credit unions, you’ll find comparatively lower rates.
When you’re paying interest on an auto loan for 60 months or a mortgage for 30 years, getting the lowest possible interest rate makes a significant impact on monthly payments and the overall interest you pay. This makes credit unions an appealing choice for loans and lines of credit.
So, if you’re in the market for a loan, or simply want your money to work harder for you, check out the competitive rates at a credit union, like PSECU.
If you’re looking to save on fees, you should consider a credit union. With a plethora of accounts requiring no minimum balance and the absence of monthly service fees, you can recognize significant savings over the course of a year when you choose a credit union.
If you find a bank offering free checking, is it really free? Or are there numerous “fine print” qualifications? Are you restricted on the number of ATM withdrawals you can make per month? Can you write only a certain number of checks monthly before you’re obligated to pay a fee? Are you required to have direct deposit set up?
Credit unions offer several account options, often with fewer restrictions, obligations, and complications.
The benefits credit unions offer aren’t just financial. Other nontraditional perks that credit unions may offer include:
- College scholarships for high school students
- Product discounts for members
- Coupons for entertainment options
- Free financial wellness resources for kids and adults
- Online services, such as planning calculators, budgeting tools, and spending tips
- Donations to the communities they serve
Should I Switch to a Credit Union?
Credit unions are a great option for many people, and they provide a range of perks that big banks simply can’t, such as a more personalized banking experience, lower rates on loans, and higher rates on savings accounts.
Being part of a larger credit union that’s working to help its members achieve their financial goals isn’t insignificant. Working together to make spending and saving easy, cost-effective, and rewarding is what credit unions are all about.
It’s easy to find a home at a credit union and joining one can be simple. But it’s important to find one that offers the services you need and the convenience you desire. As a safe, reliable alternative to banks, credit unions can help you take the next step toward establishing a solid financial future.
What Are the Benefits of Joining PSECU?
PSECU, founded in 1934 by 22 state employees who pooled just $90, has grown into a credit union that manages more than $8 billion in assets on behalf of our more than 590,000 members. Membership extends beyond state employees to include students, faculty, and staff at many Pennsylvania universities and colleges, as well as hundreds of businesses that offer PSECU membership as an employee benefit. We believe in providing superior financial products, online tools, financial wellness resources, and top-notch service.
We also offer scholarships to members graduating from high school, a wide variety of lending products, and opportunities to earn cash rewards. With our Founder’s Card, you can earn 2%2 or 1.5% cash rewards on every purchase, every time. And with our debit card rewards, you can earn $.05 or $.10 on eligible purchases3 when you pay with your PSECU debit card.
At PSECU, our Members Achieve More. We’re committed to giving back to our community and helping you achieve your financial goals. It’s what makes us different. We work as your trusted financial partner to make smart decisions that help your money work harder and smarter for you.
Ready to get started with PSECU? It’s the perfect time! Unlock the secret code for Penn State alumni, friends, & fans. Then earn up to $300* when you meet promo requirements, including adding a free checking account with a debit card, activating the card, and establishing and maintaining qualifying direct deposit(s) per the promo rules. Get started today.
*Level Up - Up to $300 Bonus Terms and Conditions current as of 4.3.2023
From 1/1/2023 to 12/31/2023, PSECU is running a new member incentive bonus. To receive up to $300, new members must sign up with a promotional code and satisfy each of the requirements listed below. PSECU will deposit member incentive bonus into the Regular share within 45 days after the requirements are satisfied. Promotion open to U.S. Residents who are 18 years of age or older at the time the account is opened. Limit one (1) new member Level Up bonus per tax identification number used to open a new PSECU account. You will not be eligible for the Level Up bonus if you are a current PSECU member, have closed an account within the past 12 months, or have received a previous new member incentive bonus within the past 12 months. Members who open accounts and/or loans by fraudulent, suspicious, or illegal means, including but not limited to providing PSECU with fraudulent or fabricated information, are not eligible to participate in this bonus offer. PSECU may adjust the deposited bonus or remove the deposited bonus at any time if PSECU suspects accounts and/or loans were opened by fraudulent, suspicious, or illegal means, including but not limited to providing PSECU with fraudulent or fabricated information. $5 is required to open and maintain a Regular share account. This $5 share deposit is also required to be eligible to receive the $300, and the member must be in good standing as defined by PSECU's Bylaws Article II, Section 1. A $5 minimum share purchase will be made on behalf of the new member by PSECU. If the member account is closed within the first year of membership, the initial $5 share will be retained by PSECU. The Annual Percentage Yield on PSECU's Regular share account is 0.50%. This variable rate is current as of 2.1.23 and may change. Withdrawals and fees may reduce earnings on the account. The recipient of the bonus (up to $300) is solely responsible for payment of applicable taxes on that amount. If you have any questions, please seek the advice of a qualified tax professional. All decisions of PSECU regarding this promotion are final. PSECU may terminate or change the terms and conditions of this promotion without notice. Subject to all applicable federal, state, and local laws and regulations.
$100 Checking Bonus Requirements
You must be approved for savings and checking accounts, a PSECU debit card, and digital banking (online or mobile) account access and activate your debit card and log into digital banking within 30 days of establishing membership.
$100 Direct Deposit Set Up Bonus Requirements
You must meet the requirements of the $100 Checking Bonus and establish one or more qualifying payroll direct deposit(s) that together total $200 per calendar month, within 90 days of establishing membership. Qualifying payroll direct deposits are defined as paychecks, Social Security payments, and pension payments.
$100 Direct Deposit Bonus Requirements
You must meet the requirements of both the $100 Checking Bonus and $100 Direct Deposit Set Up Bonus and maintain the qualifying payroll direct deposit(s) for a minimum of 90 days after the first qualifying payroll direct deposit.
4 All PSECU deposit shares, including checking, Regular, additional savings, money market and certificates, are federally insured by the National Credit Union Administration (NCUA) up to $250,000, the maximum allowed by law. In addition to the $250,000 of insurance provided on an individual account or combination of individual accounts, you are also insured up to $250,000 for any combination of accounts you may hold jointly with other individuals.
The content provided in this publication is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Some products not offered by PSECU. PSECU does not endorse any third parties, including, but not limited to, referenced individuals, companies, organizations, products, blogs, or websites. PSECU does not warrant any advice provided by third parties. PSECU does not guarantee the accuracy or completeness of the information provided by third parties. PSECU recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.