If you're rebuilding your credit after filing bankruptcy or if you're looking for a different way to store your funds, you may want to consider using a credit union instead of a traditional corporate bank.
While most people have heard of credit unions, many are unfamiliar with how they work or what benefits they might be able to offer. Basically, credit unions are financial cooperative organizations that are controlled and owned by their members.
Credit unions, unlike corporate banks, are not organized to make large profits for a group of people who may or may not keep actual funds with the organization. Rather, they consist of owner-members who benefit directly from any profits the union accumulates.
Members of credit unions are "paid" their share of the union's profits as interest on savings accounts (or, in the terminology of credit unions, "dividends" on "share accounts") or reduced interest rates on loans. When taken as share dividends, credit union profits are taxable like any other income.
Perhaps the feature that distinguishes credit unions most distinctly from corporate banks is the requirement for membership. Only union members can deposit money in a credit union, and only members are eligible for loans given by the union.
But, with a reported 87 million members in the United States alone, credit unions are by no means exclusive or impossible to break into. While some unions are based on particular affiliations, some unions require only residence or employment in a given state.
Members also elect a board of directors who work on a volunteer basis to establish interest rates and other organizational tools.
Because profits from credit unions go almost exclusively to member-owners, dividends on share accounts tend to be higher than interest rates on savings accounts in banks. Similarly, interest rates on loans are often lower than those offered by corporate lenders.
In an effort to provide members with service and benefits similar to those available to account holders at large banks, many credit unions offer share (savings) accounts, share draft (checking) accounts, credit cards, online banking, and share term (deposit) certificates.
Interest rates on credit cards, car loans, and home loans issued by credit unions tend to be lower than those issued by banks, according to a report from CNNMoney.com. Additionally, credit unions are more likely to offer loans to borrowers with limited or blemished credit histories.
Because of this, credit unions can be excellent for those trying to get stronger after bankruptcy or recent graduates who haven't yet established much credit.
CNN Money also warns that, while credit unions can be useful in all the areas mentioned, they don't live up to some benefits provided by larger banks. For example, credit union-issued credit cards tend to have less impressive rewards programs than cards from corporate lenders, according to reports.
Also, depending on the size of the credit union, convenient ATMs may be hard to locate.
If you're looking for a new way to handle your money or a new lender for some big-ticket purchases, you may want to investigate credit unions in your area by visiting this Web site: www.creditunion.coop.
Before making any major decisions, though, be sure to consider all your options or consult with a bankruptcy attorney for advice.